Introduction

Introduction

Ask any accountant and they will tell you that Cash is King and it is true.

More businesses close due to lack of cash than any other reason. You could have a brilliant product or service but poor cash management will get you in trouble.

We need to be aware and manage the Cashflow / Cash Circle – how quickly money comes in and how quickly it goes out of the business

Let’s take an example:

The Sales Side

You provide a service for a regular customer on 1st June – the agreed price is $250

Everything went well and you sent them an invoice on 7th June.

Your customer takes 14 days to pay and you receive payment on 21st June

The Purchasing Side

For you to provide the service on 1st you need external supplies which you bought off your regular supplier. 

They issued their invoice of €75 on 1st June when they delivered the goods.

You also take 14 days, and pay them on 14th June.

Cash Circle

Do you see that you have money going out on 14th but you are not getting paid until 21st?

The busier your business gets the more complicated the cash circle is and the harder to keep track therefore we need put systems in place so we can see what is going on the flow of cash