Have you heard the saying “Cash is King”?
When it comes to business (and personal) finances, cash flow is the life-blood. Not having available cash can spell tricky times and cause loads of stress. In fact, when working with clients, cash-flow management is our primary focus for building a resilient, sustainable and profitable business.
So when is cash not your friend?
Let’s say you take a look at your bank balance and you see a relatively low number. And then you take a look in your wallet and only see a couple of gold coins. And then you ask yourself…..where is all my money?
Now, if you rely heavily on cash and those atm withdrawals to pay for things, then it can be super tricky to work out where you’ve been handing out your dough. If you want to keep track of your spending, you need to be right on top of your receipts, as well as rely on your memory a whole lot. And I don’t know about you, but when I have cash in my wallet, it seems to disappear super fast…..
But, if you make a habit of using your debit card (and note here I say DEBIT card and not CREDIT card…..the reason why is a whole different conversation), then you also have an independent record of your spending. And, from a bookkeeping perspective, it is so much easier to track and measure your expenses when you can just download them from the bank.
Ways to get out of the cash cycle
- Decide on a limit that you get out of the atm each week. Doing this will limit your cash spending, and can also serve as a bit of a budget if you make sure you don’t spend more than is in your wallet.
- Think about your tax. I know thinking about tax is something you only want to do once a year, but if you’re paying for stuff with cash there’s less of a paper trail to justify and back-up your expenditure.
- Get yourself a debit card. A debit card means you’re still spending money you actually have (as opposed to getting yourself into debt). Your transaction is recorded then and there, plus you still have the convenience of a credit card. Just note, this is not an invitation to go on a spending spree ;-).
- Track your spending! Don’t underestimate this step. As soon as you begin to become aware of where your money is going, you begin to take better care of it. This can ultimately lead to smarter spending and better financial decisions.
And my number one tip for keeping on top of your cash when you’re in business…..make sure you have a separate business bank account. This in and of itself is not going to work if you don’t have a plan or discipline, but by keeping your personal finances well clear of your business dollars means it’s so much easier to track exactly what is going in and out, plus it keeps everything all together so you’re not chasing expenses all over the place.
Reducing your reliability on cash means that, not only do you have more accurate data for your financial decision making, but you’re also saving money, time and energy when it comes to outsourcing your biz finances. Or your own sanity if you’re going DIY.
Need to set up a business bank account but not sure on the best one? I have a list of low/no fee business bank accounts (Australia only) that can help you find the right one. Message me here with the subject line "Bank accounts" and I'll shoot it to you pronto.