Business activities are usually established to generate profits – money. Thus all business owners dream of a positive cash flow. For them this simply means that there is more money coming in than money going out. If it were just as simple as that then perhaps we would not need the services of accountant Toronto to help us monitor and manage our cash flow effectively.
The problem with the more coming in than going out theory is that cash outlays and sales are not always constant. They are very dynamic. As an example, a business establishment may want to stock up on supplies at a time when prices are low. To do so the owner needs to weigh anticipated expenditures so he can use whatever money he can spare to avail of the low prices of supplies. If the owner does not have correct cash flow information, he may either: use to little of his free money to avail of low prices and thus lose a chance at a great bargain, or he may buy too much and cause an operational cash crunch down the line.
A cash crunch is no picnic. Aside from the emotional hardship having to scrounge around for operational expenses, such an exercise can ruin a business’s reputation with banks, suppliers, employees and clients. Unpaid supply bills, underfunded checks, late salaries and inability to provide products and services clients need can do that very fast. That being said, some of the best accountants in Toronto can be found by simply visiting www.srjca.com. Good accountants Toronto will help the business owner to manage cash flow properly by:
- Providing a projection of when, where and how cash outflows are bound to happen: Since many expenses are cyclic either cyclic in nature or directly proportional to revenue (sales of products or services), it is not hard to do for trained professionals.
- Providing a projection of when, where and how cash inflows are bound to happen: Sometimes historical data help provide a relatively accurate estimate of sales peaks and troughs. For example, everyone knows that, in most countries, sales shoot up during the holiday season.
- Providing efficient ways of sourcing extra financing when required. Many businesses borrow extra capital for a short time to avail of sales peaks. Good accountants will show where to source the funds for less cost, and whether borrowing extra capital is advantageous or not.
- Prepare historical cash flow statements: These aid in analyzing cash flow and any improvements that may help the business operate more efficiently
- Provide advice on measures that would improve cash flow: Advice may take the form of improving collection efficiency, closely monitoring maturing payables, the most advantageous use of idle cash, etc.
The cash projections that many accountants affiliated with organizations such as Chartered Professional Accountants Ontario provide are designed to meet the requirements of the business owner. They can develop short term cash flow projections to be able to manage daily operational cash requirements, or long term projections. But the goal is the same: prevent painful and sometimes embarrassing cash shortages.