How much cash is in your business ?

A quick and easy guide.

Check your real time cash in your business.

Ever wondered how much cash is actually in your business? Unfortunately it isn't always clear and it isn't as simple as opening your banking app and seeing the balance. The concept to work it out though is actually pretty simple. 

First things first you need good data. Whether it is Xero or MYOB, it needs to be something with a daily feed from the bank and you need to reconcile it up to now. A few days can make a big difference!

What you want to look at then is your balance sheet. It is one of the most powerful reports you have and one that business owners tend to ignore or have never been shown how to use.

You want to look through your current assets and add up all the liquid assets you have. This will mostly be cash at bank and debtors. Make sure to only include debtors you will get paid for in the next 7-14 days. This is a current available cash calculation after allThen you want to look at what you have to pay in the short term. On your balance sheet this is the current liabilities section and will include GST, PAYG, credit cards and trade creditors. You also need to be careful to add in tax provision for the current years profits. For a simple calculation of this, look at the profit to date and x 30%. Although this isn't payable now it is one thing that you need to put aside as you go.

Assets-liabilities gives you your cash position.

So what does that mean. It can mean different things to different businesses depending on risk profile, debt levels and goals.

A common scenario may be to work out what a months costs are (wages plus overheads) and make this your safe level. Add on what loan repayments you have for a month so you know that you are covered in an emergency. Say this number is $70k. If your basic assets-liabilities calc tells you there is $150k then maybe you could look to pay a dividend or make a lump sum payment off a loan.

It is always worth having a quick chat to your accountant at this point as there may be tax consequences to withdrawing the money but it is a calculation you can easily do yourself and track so you have a good awareness of what your actual position is.

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