Your business is growing rapidly – sales are up but your bank account is unhealthy.

For many growing businesses this is common.  Your working capital is insufficient to fund the growth of your business.

Some of the problems are:

•  Generating more sales usually requires more inventory; more work in progress; more staff costs before the cash from the revenue is realised.
• Customers / clients typically take 30 to 60 days to pay.  Meanwhile you have to pay operating costs sooner than this.
• You may need equipment to fund your business expansion creating pressure on your day to day operations.
• Most businesses operate on an accruals basis and accrual accounting is completing different from cash accounting.

To improve your cash position:

• Tighten your credit controls.  Be more vigilant with overdue invoices and reduce payment days.
• Lease instead of buy.  By leasing (borrowing) you do not have to fund the entire cost of the equipment.
• Use invoice factoring; lines of credit etc. to access more cash.
• Always review you pricing and margins – increase sales does not necessarily lead to increase profit.

McNamara & Company - Chartered Accountants, located minutes from the Melbourne CBD
www.mcnamaraandco.au/contact-us
Phone +61 3 9428 1062
Email admin@mcnamaraandco.au

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