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Managing business cash flow and income

Posted by Xero on March 7th, 2022.      0 comments

Managing small business cash flow and income in 2022

It’s been a lean time for small businesses, and especially the families supporting them.

nz money 100s 50s generic n2Xero’s small business trends report shows that 60% of small business owners are worried about their household finances running low. So while 2022 will hopefully be a year of rebounding sales and revenue, owners really need that to carry through to the business’ bottom line.

What the experts say

While there will be a temptation to withdraw any spare cash from the business as ‘owner’s drawings’, experts say it’s important to be mindful of upcoming and potentially unknown expenses.

Owners often overlook upcoming business expenses when taking drawings, which creates cash flow issues later. These cash flow issues create further disruption to the household budget because money has to be put back into the business. 

Rather than clearing out the business bank account, owners are better off paying themselves a modest amount at regular intervals.

Takeaways for small businesses

There are a few things small businesses can do to help support their recovery according to Xero’s small business trends report:

  1. Analyse your business margins and focus on products that generate the most profit
  2. Create a ‘rainy day fund’ within the business so you’re not constantly loaning it money from your personal savings
  3. Schedule regular, sustainable drawings to ease home budgeting
  4. Keep your regular drawings modest, as you can always give yourself a bonus payment at the end of a good year

Got a question about making the most of accounting or bookkeeping in your business? Get in touch with our Xero specialists who will be able to assist you with all your cloud accounting queries on 09 520 9200.

Alliott NZ Chartered Accountants & Business Advisors are Platinum Xero Partners in Auckland.

Source: Xero

 

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