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Mastering the basics of cashflow: Six tips for keeping your business on track

What is cashflow? It is defined as “the total amount of money being transferred into and out of your business.” It is not just the amount of cash your business has at the moment in time than metrics like profit.

For small businesses, cash flow can cause big problems particularly for seasonal businesses. That painful time between the invoicing and payment is felt by most small businesses but if you pay attention to your small business’ cashflow, this problem is minimised.

Setting cashflow targets is the first step to good cashflow management. When you are able to prepare and maintain a good cashflow forecast that you can update regularly, you can get the idea of your business’ financial outlook for the next six months or so.

Once you have your cashflow in hand, the next thing to think about is establishing agreed payment terms. After knowing payment terms it will be so much easier to know when payments are going to be overdue and manage your cashflow situation.

However, the problem is that many Australian entrepreneurs struggle managing with their cashflow. According to an article published by Smart Company Australia, more than 60% of Australians regularly or occasionally draw up personal finances, like a personal credit card, to support their business—a practice that does not equate to long-term success.

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Wednesday, May 31st, 2017 Perth Business News