Getting a cool tax returnGetting a cool tax return

About Me

Getting a cool tax return

For many years I couldn't work out how my co-workers seem to be getting these really cool tax returns, which let them go on holidays to Bali, where I seem to get tax returns that let me go to the local fast food joint if I was lucky! Since I met my girlfriend I started to go to her tax accountant and I finally understand how it all works. There are so many easy deductions that I can claim now, which is going to help me head to Thailand this year! This site has some of the tips I have learnt to help you maximise your return this year.

4 Tips for Maintaining a Healthy Cash Flow in Your Small Business

The success or failure of any business largely depends on its ability to maintain a steady and healthy cash flow. Without cash in hand, it will be impossible to take advantage of business-friendly opportunities or handle unanticipated events. Healthy cash flow comes down to effective asset and liability management.

1. Begin on a healthy balance

Most people jump into business without planning carefully for start-up costs. As a result, they deplete their cushion of funds before the business breaks even and hence begin the steady decline towards failure. It is important to be liquid during start-up, particularly since there are many unplanned expenses and little cash inflow. You can do this by saving up a sizeable initial capital investment. Consult with an experienced accountant when drawing up a business plan to ensure all expenses are in the budget. Your cash investment should cover the worst case scenario, with some left over for unanticipated expenses/events.

2. Establish a minimum balance

Ensure that your business maintains an amount of cash reserve to handle emergencies and unanticipated events. This amount will be determined by your line of business, size, and expenses among other factors. Your accountant can help you determine a healthy sum. However, be careful about having too much cash in reserve, as this will cause you to miss out on profitable investment ventures. You can also consult regulatory standards for guidelines on the minimum cash balance.

3. Stay informed about the cash account

Apart from including the cash flow statement when preparing your financial statements, it's important for your accountant/bookkeeper to maintain an updated cash journal detailing all cash transactions. He/she should also carry out regular bank reconciliations and investigate any inconsistencies. Note down any exceptional expenses so that you can prepare for them in future. Preparing interim cash flow statements can also help you stay informed, allowing you to make adjustments to your cash policies in order to regain healthy flow.

4. Manage accounts receivables

You should have a robust scheme to ensure your credit clientele stick to payment schedules. Late payments will adversely impact your liquidity and prevent you from meeting your own obligations with creditors. Have a system of follow-up with late-paying customers and include and enforce late payment penalties in your contracts. In addition, late-paying customers may be denied credit for a given period. Early payment discounts can give customer incentives to honour debts in time. Your accounts receivables policy should include careful assessment of customers' backgrounds before extending credit. 

For more information, talk to an accountant.