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What Is Cash Flow?
Most business and personal stress can be related to low, lumpy or lacklustre cashflow. If you’ve ever had your credit card bounce for example or had to ‘duck’ a phone call from someone you owe money to, you know that intermittent cashflow can cause sleepless nights and anxiety. So in the pursuit of stabilised cash flow it’s important to understand that your speed of cash flow is driven by 4 cycles, measured in days.
Sell it.
How many days does it take for me between first presenting my value and to when the client says YES?
Make it.
How many days does it take to either produce my product / service or how long does it sit on the shelf?
Deliver it.
How many days does it take us to deliver the final product from when the client said YES?
Bill it.
How many days does it take for us to bill the client after they say YES and then how long does it take for the money to arrive in the bank?
So how many days is your cash flow cycle?
Remember: What you measure you treasure.
So let’s crunch some numbers to understand the impact of Cash Flow Days. Here’s a business who has counted the days of their 4 cycles.
That’s how many days they’re out of pocket. SO let’s brainstorm some ways to reduce those days. Most ideas will fall into one of 3 categories –
Shorten Cycle Times
Eliminate Mistakes
Change the Business Model
If the consistent struggle and grind of living cheque to cheque wasn’t enough, think about what a cash flow day costs you.
So how many days is your cash flow cycle?
So a 119 day Cashflow cycle means that you are out of pocket by $321,300 ($2,700 x 119). That’s a lot of money, stress and pain. But imagine for a minute that we found a smart way to reduce your cash flow days by just 15 days.
Reducing your cashflow days by 15 days would mean an extra $40,500 in your account.
And with that, you can:
- Are you paying too much tax? If so, why?
- Can we reverse any overpaid tax?
- How to best pull money out of your business structure.
- Here are the ATO issues we found, and how we plan to solve them.
- What your numbers say about the business.
- Overview of your business plans & goals.
- Walk through of “It’s all sorted” - our small business tax advice and lodgement service, that aims to pay for itself in tax saved.
- The process of changing accountants.
- Any final questions before you come on board?
But it all starts with knowing your days.
When you work with Inspire we not only help you know your cashflow days, but work with you to implement new technologies or business processes to dramatically reduce your cashflow days, leaving more money in your bank account where it belongs.
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