How Accountants Manage Small Business Cash Flow
August 23, 2018
Richard Branson once said that cash flow was the lifeblood of any business. But coming from a billionaire that literally owns an island, this can be taken as sage advice, or with a grain of salt.
Like him or not, Branson has a point. Having positive (more money in than out) or negative (more money out than in) cash flow is an indicator of the health of businesses. It does need some nuancing, but it’s a good rule of thumb.
Whether businesses are in the red or black, a clear cash flow pipeline is central to keeping them afloat. And who’s job is it to ensure a quality pipeline? Accountants.
How do they do it? In 4 major ways.
Or, as it’s more commonly known, financial planning. It might seem like a Herculean task to predict where your business will be in the foreseeable future, but it doesn’t have to be that complicated.
Accountants know what it costs to maintain and grow their business clients financially. Planning could be as simple as calculating a general expense forecast for overhead bills, payroll, or other costs.
How can anyone know how much money will go out or come in, if no planning has been done?
It could even go as in-depth as investments, or even predicting market trends. We’re getting more into the CFO role here, but some accounting firms offer that too.
In terms of cash flow, forecasting is essential. How can anyone know how much money will go out or come in, if no planning has been done? Some simple foresight may be the key for turning cash “no” into cash flow.
Sorry that was awful.
2. Managing Accounts Payable & Receivable
Incoming and outgoing funds aren’t just about bills, benefits or those delicious little donut holes from Dunkin Donuts (oh my God).
It’s not only about that. For businesses, accounts payable and receivable may be even more important to creating healthy cash flow.
Who you owe and who owes you are important factors to consider when thinking about incoming and outgoing funds. You might end up having more money than you thought you would, or less than you’d expected. Neither are good.
Even if you happen upon some extra cash, it’s a huge pain to then have to figure out where it came from, apply tax, and enter it into your books.
All unexpected work that ends up costing you more time than you have to give.
Accountants can arrange payments to their clients’ suppliers and business partners, and manage incoming funds from whoever owes you. This way, clients’ books are always balanced, without any stress on their part.
3. Accurate, Reliable Payments
Any payment going anywhere is better on time than late, and better in full than missing a few bucks.
Cash flow is easily bogged down and tied-up by late and lacking payments. Whether they’re coming in or going out, an entire cash flow system can be thrown off by these simple and all-too-common hiccups.
When looking for a global or domestic payment solution for small businesses, accountants need to ensure efficiency, cost-effectiveness, and safety for their clients’ money.
Thanks to the internet and app integrations for major accounting software providers such as Xero, NetSuite and Quickbooks, accountants have thousands of payment providers at their fingertips to offer their clients the best and most tailored solution for their needs.
Veem is one such provider. It’s the payments solution built for small businesses. Simple, accurate, and secure. Exactly what the busy business owner needs to pay who they want, when they want.
4. (Don’t) Do it Yourself
(Pictured is a reason NOT to do ANYTHING yourself.)
Automation has become a cornerstone of the accounting and bookkeeping world. So much so that technologies created to help the industry have actually expanded the role of the accountant and bookkeeper. Firms around the world have had to evolve from number puncher, to financial consultant and advisor.
Sure, there’s been pushback. But the benefits to accountants and clients outweighs the setbacks.
What does that mean for your business’ cash flow?
Firms around the world have had to evolve from number puncher, to financial consultant and advisor.
Automating menial and time-consuming tasks not only saves your business time and money, but the scheduling capabilities keep your cash flow more timely and ordered than you probably ever could. On top of that, automation gives your outsourced or in-house accountant leg room to consult and advise you on financial decisions.
Like Branson said, cash flow is the lifeblood of business. It’s not the only important thing, but to make your vision come to life, you need a solid foundation. With an accountant behind you, you’re sure to thrive.
Get your money out from under your mattress, and get organizing.