Cash flow management is generally acknowledged as the single most pressing concern for Small Medium Enterprises (SME's).
For Underwriting Agencies it is of even greater importance due to the solvency and cash needs requirement under RG 166.
The main reasons why profitable business can have cash flow problems are:
- Pure focus on growth and profit but not cash flow;
- Imbalance between debtors days and creditors days;
- Poor debtors management;
- Management of taxation obligations - Income tax, PAYGW, GST and payroll tax;
- Cash being stripped out by directors;
- Capital intensive business (large amount of Plant & Equipment required); and
- High Levels of debt
For all business, it is best practice to regularly monitor cashflow.
WLM Accountants can assist by reviewing software used, preparing cash flow forecasts and providing training.