KPMG Spark Blog
Maintaining a healthy business cash flow is one of the most important building blocks for any business to be able to build a strong financial foundation. Continue reading for a few best practices for ensuring your organization has enough cash on hand.
Maintaining a healthy business cash flow is one of the most important building blocks for any business to be able to build a strong financial foundation. In times of economic uncertainty, when smart cash flow management can often be the deciding factor between businesses that flourish or perish, it is especially vital. Managing cash is important, but creating a system for business cash flow is much easier said than done.
Maintaining cash flow helps you have the money available to pay expenses, reinvest in the business, acquire inventory, pay debts, and weather unforeseen financial challenges.
Here are a few best practices for ensuring your organization has enough cash on hand.
Pay close attention to key performance indicators (KPIs) like:
o Daily cash balances
o Net cash position (Cash balances – current liabilities)
o Quick ratio (Current assets – Inventory / Current liabilities)
o Days sales outstanding (Accounts Receivable / Net Credit Sales x Number of Days)
KPMG Spark’s accounting dashboard includes much of the data needed to calculate these KPIs, making it easy to monitor your business' cash position.
A rolling 12-month cash flow forecast can help you predict months in which you’re likely to experience a cash surplus or a cash shortage. By predicting cash shortages, you can plan for them by saving more when you’re flash with cash, stepping up receivables collection efforts, or establishing a line of credit with your bank.
When your sales are tied up in receivables, you can be short on cash even though revenues are good. Consider offering clients a discount if they pay in full within a limited time. A small discount, such as 2% if the invoice is paid within ten days, may be a small price to pay when you need access to cash.
Remember, profits and cash flow aren’t one and the same. Allowing your customers to pay on credit makes it easier for customers to do business with you and encourages larger purchases. But that lag between when you make a sale and when a customer pays you can make maintaining a positive cash flow tricky. Monitoring your cash flow, creating cash projections, and building up some cash reserves helps you have the cash available to keep your business on solid financial ground. For more information on Managing Cash Flow in 2021, check out our blog.
Generating a cash-flow forecast that can guide decision-making is made much easier with real-time bookkeeping—which means that your financial information is current and not lagging weeks or months behind. To learn more about our bookkeeping services and managed accounting, click here or call 1-855-777-7696 to speak with a KPMG Specialist.
The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG LLP.
This blog article is not intended to address or provide advice concerning the specific circumstances of any particular individual or entity and does not constitute an endorsement of any entity or its products or services.
Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities.
The following information is not intended to be “written advice concerning one or more Federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.
Sign up for our newsletter
In order to run a successful business, you need to have a solid financial foundation. Planning to pay taxes is an important part of building this foundation. Join us as we discuss tax planning strategies to help your business plan for tax season.
When you first open your business, you might be able to run everything by yourself. Eventually, hiring a bookkeeper will become a vital step to help ensure continual growth for your business. Continue reading for 5 signs that indicate it’s time to hire a bookkeeper for your business.
Join us to learn how your bookkeeping may be holding back your business from functioning at its peak performance.
KPMG Spark works with many business owners and executives to simplify their bookkeeping. Continue reading to learn how keeping up with your bookkeeping will help you build a solid financial foundation for your business.
There are many important differences between an employee and an independent contractor that can affect the financial foundation of your business. Continue reading to learn some of the financial impacts you should consider when making this decision.
Running a successful business depends on a solid financial foundation. You can have the most sought-after products or services, a killer marketing strategy, and loyal customers, but if you don’t have a solid financial foundation to manage cash flow and support other business decisions, it can all come crumbling down. Continue reading to learn how selecting an entity structure can help build your financial foundation.
Real-time bookkeeping uses live data to give you visibility into your current income and expenses, balances, and more. The visibility that real-time bookkeeping provides allows business owners to gain valuable insight into both their finances and businesses. Continue reading for 5 valuable insights you can gain from real-time bookkeeping.
Having a personalized bookkeeper can provide valuable benefits to any business owner. A personalized bookkeeper can monitor and organize your business’s daily transactions. Not only that, they can also give you the reassurance and security you want to have about your company’s finances. Join us to learn more about the importance of having a personalized bookkeeper.
Beyond predictable product expenses, some restaurants might opt to use the Restaurant Relief funds to better adapt to a post-pandemic dining culture that will likely continue to expect extra sanitization, more outdoor seating, and ample distance between tables—all of which have associated costs.