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How to Establish Cash Flow When Starting A New Business

Cash Flow concept with young man holding a tablet computer

Without cash flow, any business will fail. Establishing cash flow is an essential part of your business plan when you are deciding how to start a new business. It’s not as difficult as it sounds, you just need to know where to look. ABSS accounting software can help you do this, fast. Start off by identifying the sources of cash flow in your business in time periods. Then strategise how to build these sources and make them sustainable. ABSS accounting software provides you with cash flow statements at regular intervals. This allows you to know what your cash flow is all the time.

The benefits of cash flow

In addition to keeping your SME business afloat, cash flow allows you to think strategically, without worrying about your business fundamentals. This allows you flexibility and creativity for new business ideas and most importantly, experimentation with business opportunities. All these will grow your SME business. When you are considering starting a business, or you have already established your startup, someone has to pay you. Cash or electronically. We have all experienced the joy, and sometimes the surprise, of seeing the first numbers appear in our bank accounts. Where the payments come from, how soon they come and how many are your key cash flow indicators. Use this information to work towards finding your cash cow.

Finding the Cash Cow in your business

Good business is built on volume. You may have a great product that only sells a few and has a low margin. You may have another product or service that sells a lot and has a high margin. This is your cash cow. How do you find it? One successful entrepreneur describes his journey, “I relied upon juggling various small sources of income until something showed it had enough of upside potential that I could slowly start selling off or quitting other projects to focus on just the one or two enterprises that worked.”

Start by identifying your profit centres. By identifying the sources of your income and quantifying that income and the associated costs, you will be able to calculate the profitability of each separate part of your business. This is how you find your cash cow.

ABSS accounting software will help you to identify your profit centres, fast. So why not use ABSS accounting software to find your cash cow? Once you have established cash flow, you need to monitor it. ABSS Accounting software makes this easy.

Where is your cash flow?

Cash flow is the total amount of money being transferred into and out of your business. On ABSS accounting software the Statement of Cash Flow report shows how your cash position has changed over a period of time, the amount of cash earned from profit, where you received additional cash, and where your cash was spent. The Statement of Cash Flow report uses the ‘indirect ‘or ‘add-back ‘method to calculate the cash flows. Once accounts are classified, they are displayed in the section of the report you specified. The classifications that are shown in this report are Operating, Investing and Financing. Take a look at a simple example of Operating cash flow. You can also receive personalised support for your business through an ABSS Certified Consultant. This help is valuable if you are unsure about which classification to use. There is also a user-friendly Guide to the Statement of Cash Flow report available.

To use the Cash Flow Analysis report just click Analyse Cash Needs to display your cash analysis. The Cash Flow Analysis includes cash transactions that are expected to be paid or received within the Days To Look Ahead period. This allows you to create cash flow forecasts. You can then lead your business in an easier, faster, and more efficient way, with vision.

Don’t just keep your business alive with ABSS accounting software use it to help your business thrive.

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