The first thing a cabinet maker should do in order to begin to control the cash flow of the company, is to list all of the necessary purchases for the organisation including:
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- Tangible assets – inventory and equipment
- Services – such as insurance and power
- Costs of people involved
Once you have made this list, you can draft a budget for your company. A budget is a financial plan for your business. It enables you to plan your finances, set your goals and reduce cash flow problems in the future; you may also discover opportunities that you have been overlooking.
Twelve essential cash flow tips for managing cash flow for a cabinetmaker:
- Make realistic goals.
- Think of your budget as a way to achieve your goals.
- Make sure you can track expenses and earnings accurately.
- Leave contingencies in your budget for the unexpected. Cabinetmakers can’t always predict with certainty the ebb and flow of the market.
- Be careful with your cash flow especially if you are in a seasonal market.
- If you have been in the business for a while, use your history as a guideline.
- If your numbers aren’t adding up, have a look at the industry for benchmarks to give you an idea of the kind of ratios you should be using.
- Differential between fixed and variable costs.
- Make a best and worst case scenario budgets and know that your business will fall somewhere in between.
- If your sales income is ten percent or twenty-five percent below expectation then look at the effect on your cash flow and work out the savings you should be making.
- Discuss your budget and goals with your business coach in Melbourne to help you prepare the information in the way that suits the requirements of a bank, which will give you a better chance at raising finance if you need it.
- Your cash flow forecast is as important as your budget and will alert you when you have working capital shortfalls.
If you follow these guidelines you’ll be able to provide a stable cash flow for your cabinetmaking business in the long term.