Operating costs are always the unending bills that come through the door every month that constantly seem to go up and up and up.
Thinking back … when did you start considering every cost you would need to take into consideration when pricing your services/products?
You need to have considered the costs of running a business from the outset before you even start a business. You definitely need to know every operating cost going forward to price your service/product. A business cannot survive if the operating costs exceed the Gross Profits from Sales less Cost of Sales — and who goes into business to run at breakeven?
It is not worth the stress; you might as well go out and earn as an employee as you would take more home.
Cash Flow Forecast
A Cash Flow Forecast is exactly that, it identifies where the cash is flowing in and out of the business not just in the profit and loss but including loans and asset purchases and compliance obligations such as BAS and PAYG Withholding and predicts the future expected cash flow. By doing this, you can easily identify any falls, pits or times when you have surplus to put aside for those rainy days as you would in your personal bank accounts.
Obviously some markets behave differently so having a cash flow forecast and understanding when you have highs and lows in a season is a must for any business owner. Prepare for and anticipate fluctuations. Put available funds aside for those quieter months.
As part of our service to you in opening a business, we always do a Cash Flow projection and a budget with you. We know other businesses in the same fields and can document with you the exact costs that you will encounter in running your business. This guide can then help us work with you to cost your product/service. This will ensure that from the outset you have the finance available to cover the setup costs of the new business or purchased business. You also need to understand the monthly costs coming out of your bank account.
A budget is a little more rigid than a cash flow forecast in that it identifies what you expect to have to pay or receive in income and maps it to what you pay and receive. Many business owners like to follow a budget and track their estimations so that future months they can be more accurate and can be more responsive to their management of money and bills.
Did you know most accounting software includes budgeting functionality? We could help you construct your own or guide you through your software, if it has the function, to identify whether you would use it or not and how it can benefit your business if you did.
Talk to us today at Forsyths to help start you on the upwards hill of growth.