Fill in your details below and one of our friendly consultants will call you back as soon as possible.
  • This field is for validation purposes and should be left unchanged.

Follow us on Twitter

  • RT  @UpriseAfrica : The  @DrifterBrewing  #EquityCrowdfunding campaign has reached the 2 MILLION mark ! Not long to go till the campaign closes… 1 hour ago
  • RT  @TheLaunchLab : LaunchLab Company,  @MzansiGo  started with 1 crew 12 months ago. Now they have more than 20 moving crews, and the income o… 1 hour ago
  • RT  @SABEntrepreneur : Want to know more about the Africa Sustainability Challenge launch and how you can enter? Join our live #TwitterChat o… 1 hour ago
  • RT  @shanak : #Repeat and agree :) happy Monday to all :) https://t.co/vo0qpb0cDj 2 hours ago
  • - Monday Motivation - Have you set out your goals for the week? Make your Monday count. #MondayMotivaton… https://t.co/BzgAF7OD20 5 hours ago
  • RT  @NeoNdaba_ : The behaviour displayed by supporters is disgraceful, and provides a snapshot of how our characters and values may have dege… 1 day ago
  • RT  @Entrepreneur : If all your accountant does is make sure you don't get audited by the IRS, it's time to find a better accountant. https:/… 1 day ago
  • RT  @RickEdBusiness : Great team making great strides with putting together 2018 Creative Business Cup and Creative Enterprises Hub https://t… 2 days ago
  • RT  @LaurenSCochran : Dear people cold emailing #familyoffices and really just about any organization, don't address the email to the one man… 2 days ago
  • RT  @RickEdBusiness : Why is it so difficult for so many #Techpreneurs to get their heads around this so obvious truth! https://t.co/7WCjHb4p… 3 days ago
  • RT  @innovsummit : Calling all female biosciences entrepreneurs!! The deadline to apply for the 2018 FEMBIOBIZ Acceleration Programme is toda… 3 days ago
  •  @Ventureburn  Seriously? More talking about getting together to talk about a solution for small business! 3 days ago
  • RT  @innovsummit : Pitch Your Business Ideas in  @TheLaunchLab  Ideas Programme! https://t.co/6EUuhthlPi 3 days ago
  • RT  @TyronneNel : #SME Advice - Aside from the (potential) money, the (imaginary) freedom etc. that you think you’re going to earn as an entr… 3 days ago
  • RT  @TyronneNel : #SME Advice - Dear entrepreneur, an App is not a business! If you’re not solving a real world problem NO amount of technolo… 4 days ago
  • RT  @Edge_Growth : In the words of our Executive Director (Jayesh Nair): "Supporting and developing #SMEs is one of the best ways to stimulat… 4 days ago
  • RT  @TyronneNel : Full House tonight! #StartDbn Well done everyone for showing an interest https://t.co/PpKLd2iIAv 5 days ago
  • RT  @TyronneNel : #StartDbn - “You can’t get good money from a bad VC” - Solid advice  @darlenemenzies  5 days ago
  • RT  @TyronneNel : Looking forward to  @StartupGrindDBN  tonight! Expecting pearls of wisdom from  @justinclarke   @darlenemenzies  and  @aishapando … 5 days ago
  • RT  @TyronneNel : Is the #Durban SME Ecosystem finally starting to rear it’s head? #StartDbn making a meaningful impact. https://t.co/d9EvDLf… 5 days ago
 In News

Hand pointing at a Entrepreneur word illustration on blue background.

Essentially there are only three things that every entrepreneur ought to know:

Who owes me money?

To whom do I owe money?

How much money do I have in the bank?

So you’re thinking: “Wow that sounds really simple, what do I need to do in order to get to grips with those three things?” Well let’s run through the three statements as see what’s required?

Who owes me money?

During the course of each month you will be issuing your clients invoices for the products your business sells or the services your business renders. A simply calculation of the amounts invoiced against the amounts already received will let you know what is still outstanding.

In accounting terms these clients are referred to as Debtors

To whom do I owe money?

As above, besides the monthly rent and salary costs, etc., during the course of each month your business will be invoiced for the services and products it consumes. Again a simple calculation of the invoices received less those already paid will let you know what you still owe.

In accounting terms these suppliers are referred to as Creditors

How much money do I have in the bank?

Well this is the simplest of the lot – just log in to your account each day and check your daily balance.

Once you have your finger on the pulse of these three items, you have the ability to calculate your businesses cash flow requirements. Understanding your business cash flow requirements is the key to business survival. Once you understand your cash flow requirements you can then confidently claim to understand your business.

Cash flow – why do I need to understand it?

Over the course of a few months you will soon discover that not all your debtors are as honourable as you initially thought and very soon you might have several clients owing your business money. Keeping track of who owes you money and for how long it has been outstanding is very important. In accounting terms this is referred to as a debtor’s age analysis.

Now, your clients inability to settle their invoices (whether intentional or not), will soon put you in a position where you are unable to pay your creditors when their invoices become due. Keeping track of who you owe money to and for how long it has been outstanding is very important. In accounting terms this is referred to as a creditor’s age analysis.

So as you can see, knowing who owes you money (and when it’s due) allows you to pay who you owe money (when it’s due) from the money you have in the bank. This in a nutshell is the essence of cash flow.

Now you’re probably wondering how does knowing these three things allow me to put a system in place to manage all these registrations to keep my business compliant.

Well all you need to do from here is provide this information to your accountant every month and they will have all the information they need to ensure your business complies with all the necessary regulations.

Next month we will demystify your business Income Statement and Balance Sheet and NO!, you don’t need to be an accountant to understand it.

Recommended Posts

Leave a Comment

Start typing and press Enter to search

Small Business Tax Breaks for 2015 South AfricaHow to choose a Business Entity as a entrepreneur