Focusing on cash flow for your business
The Lombard Accountants team understand that turning a profit is at the heart of running any successful company today. This rings through in today’s post lockdown word as it did before covid struck. But should profits be the only financial focus if you’re looking to create a stable, long-term business in the post-pandemic Ireland reality we find ourselves in?
Cash flow is the beating heart of your business. Without an even and predictable flow of cash into your company, you can’t cover your day to day financial needs, let alone think about expanding or growing your business.
If you’re going to be in control of your companies financial destiny, it’s important to get your head around the important process of cash flow management. This is especially true in the current business landscape, where sales revenue may be less buoyant, cash can be tight and the market is going through a challenging time.
Here are some tips from the Lombard Accountants team on the key things to understand about your finances:
- Profit is a by-product of a successful business – as the owner, you want to make profits for your business, but profitability isn’t the only goal. A business can easily be profitable, but also be highly unstable in the longer term. What you want is stability and consistent revenues.
- Cash flow is essential in keeping your business alive – good revenues (income) serve to bring cash into the business. Without cash to cover your operating expenses, you have no means to keep the lights on in the business. So cash really is king!
- Know your cost base and overheads low – the flipside of your cash flow position is your costs. In an ideal world, you want more cash inflows than cash outflows, so it’s important to know your expenses and costs and to manage them carefully.
- Be proactive about spend management and easing expenditure – if you can take action that reduces your spending, that is hugely positive for your cash flow position. Choose cheaper suppliers, negotiate better deals and bring that cost base down.
- Drive more revenue, through increased sales and marketing activity – if you can increase your revenues, you also boost your cash flow. So it’s important to be proactive about running targeted sales and marketing campaigns to increase your sales.
- Keep the cash flowing and the profits take care of themselves – if you achieve the ideal cash flow position, the company sits on solid financial foundations, the cash is there for investment and the business can grow. It’s that simple.
Lombard Accountants Ltd believes in the value and the need for a strong cash flow to your company and we know from experience that it takes time to build your profits.
For the latest business/practice news, taxation/financial resources and our Newsletter, visit https://la.ie/