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Where is my cash when I have profit?

May 01, 2024

Is your business turning a profit, but your bank account is not reflecting this with the amount of cash you are expecting to see?

This is a very common issue for small business owners.  Managing cashflow is not something that we are taught - either in our personal life or our business life.

Often we have a bookkeeper and an accountant, and their focus is on making sure that you are lodging your tax return and regular paperwork, like your Business Activity Statement (BAS).

Cashflow is what money is coming in, and what money is going out.

Often, cashflow is about timing.

It's also about visibility - you need to know what is coming in and where it is going. 

This is where I see the most resistance.  Just the idea of looking at your finances conjures up so much fear about what you could find.

The thing is, it's not usually as bad as you think.  And, even if it is, it's better to know so you can deal with it, rather than letting issues grow and grow.

Having the visibility over your cashflow also means you get to see where there are patterns (or trends), and what products or services are doing the best at what times of the year.  Then you can focus your marketing on the right things at the right times.

If you can handle a spreadsheet, start putting this information into a spreadsheet so you can see what you're spending each month.  To start with you could even just start with the headline numbers - the total of what has come in, and the total of what has come out.

Your accounting system may or may not give you this visibility, so if not, you can start taking a look at your bank statements for a few months and seeing what is in there.  You'll be surprised at what you're paying for that you have forgotten about!

Come at this with an incremental curiosity - one step at a time.  Like a detective following clues one by one.

Build up to the full picture and you will be amazed at what having this knowledge and information will do for your mindfulness when it comes to money.