Author: Pat Pattinson

As mentioned before, most ailing businesses suffer from a vitamin C deficiency, one of these “C’s” are of course Cash or more specifically Cash flow.

Cash flow is the lifeblood of a business. Without cash or access to cash a business will not be able to trade. If a business cannot trade then it will not survive. Let’s not jump the gun and start off with the assumption that the business has no cash flow, but let’s have a look at the most important aspect of this deficiency. Surely we are not referring to the abundance of cash as a deficiency, but rather the lack there of and more importantly the monitoring and measuring of a business’ cash flow. After all, if you don’t know you have a problem how can you fix it.

Most business owners will tell you that it hurts them, sometimes physically, when they have to pay VAT or Income Tax. Not that they have a problem with paying SARS what is rightfully due, but because of the fact that the money is honestly just not there to always pay SARS. How can this be?

Well first off, we must all remember that most businesses have to pay SARS on an invoice based system, thus meaning you have to pay SARS based on the invoices you have made out to clients irrespective of whether they have paid you or not. This is just one of the examples as to how important it is to understand and monitor the cash and cash flow of your business.

The most accurate way in which to monitor this is by scrutinising your bank statements and comparing it with incoming (Debtors) invoices and your outgoing (Creditors) invoices. Know what you are spending your cash on every month and know what you are expecting to come in and what you are going to have to pay out. Using your Balance sheet, Income statements and Management accounts is a shortcut, but like me, if you don’t understanding accounting the basics are simply easier to understand.

In short the message hidden here is to know your numbers. Don’t rely on other people to give you the information you need, not even your accountant. They know numbers, but you are responsible for your business and you know, or at least should know, what to expect in the future of your Business.