Cash flow reporting, budgeting, and planning are essential management tools in running a successful and profitable business. They are tools that assist with strategy, financial management and review of your business performance. Let us summarise for.

Budgeting is important, as it allows tighter controls and transparency around the financials for the business. For example, if expenses are too high in a certain area, controls can be implemented to keep these costs down. Or if sales targets aren’t being met additional resources or marketing budget may be required. Budgeting sets the plan in advance that balances your expenses with your income.

Cash flow
One of the biggest reasons small businesses fail is lack of cash and for some business owners it’s easier to bury their head in the sand so to speak than have an accurate picture of the financial health of the business.

Essentially cash flow is the money that moves in and out of your business.

Cash flow in – is the money that comes into your business from sales of products or services.
Cash flow out – is the money that goes out of your business on expenses, loan repayments and taxes etc.

A positive cash flow means that there is more cash coming into the business than is being spent and a negative cash flow means there is more cash going out than coming in.

If there is a negative cash flow, that is a cause for concern. If expenses including supplier costs, wages, rent etc are not covered then the probability of longevity for the business is unlikely.

Also starting up a business is often the most difficult time to manage cash flow. Expenses pile up with money going out of the business faster than sales revenue coming into the business. Strategies can be put in place to manage this type of situation to get you into a positive cashflow situation.

We suggest seeking out your Accountant for advice and guidance if you require assistance in this area. Pinnacle Tax & Accounting are specialists in this area and have been guiding local businesses for over 60 years.

The main difference between budgeting and forecasting is that budgeting sets out a plan in detail of what a business is hoping to achieve including expected revenues and expenditure.

Whilst forecasting is an estimation or expectation for future results. Forecasting is strategic and assist businesses to realise their growth plans. Now most business owners don’t expect their accountant to make business decisions for them, but they do want help in understanding their numbers. Understanding their numbers so that they can confidently make the big decisions for the business.

The last year has been an extremely challenging one for a lot of people in business. Many businesses have had their operations disrupted to the point of going under. Dealing with decreased revenue due to the Covid 19 and navigating JobKeeper / JobMaker for employees has been challenging for some.

Government assistance has proven to be a vital lifeline between businesses sinking and staying afloat, however with JobKeeper officially due to finish on the 28 March 2021, now is the time to get very clear on the financial situation of your business going forward if you don’t already have this in place. Reassessment of eligibility criteria for decline in turnover is required in order to qualify for the second extension of JobKeeper which has seen a lot of business no longer eligible for this payment. If your business is eligible this will cover the period from 4 January 2021 to 28 March 2021.

For more information on JobKeeper please refer to or reach out to your Accountant.

In these times of uncertainty and post JobKeeper these principles are even more important. Having an Accounting professional on your team who specialises in business advisory and accounting is one of the best resources in achieving financial success in your business.

Our specialist Business Advisors are skilled at unlocking the full potential in businesses by assisting with planning and implementing strategies to grow your business and increase your profits. If you feel like your business may need some assistance in any of these areas, please reach out to Pinnacle Tax & Accounting today to see how we can assist in helping your business navigate to financial success.

Pinnacle Tax & Accounting in Camden are specialists in creative & innovative business. We’ve been servicing the Camden, Narellan, Macarthur & Wollondilly areas in all facets of accounting, strategic business advisory & planning services for over 60 years.