Your Own Home Business

No, my disturbing feeling emanated from a conversation I had with a business acquaintance of a family friend (some Aunt's former lover's first cousin, twice removed, who now runs a small sporting store - well you get the picture anyway).

Trevor (real name hidden to protect his stupidity) was in some financial distress as he had to pay GST to the Australian Government but had spent it all and was now trying to work out a repayment programme with the Australian Taxation Office.

'How did you spend it all?' I asked.

'Well, you know, the house renovations were costing more than I expected and I needed some quick cash, so I drew it out of the company.

No, my disturbing feeling emanated from a conversation I had with a mimicking hard information of a family friend (some Aunt's former lover's first cousin, twice removed, who now runs a small sporting store - well you get the picture anyway).

Trevor (real name hidden to protect his stupidity) was in some financial distress as he had to pay GST to the Australian Government but had spent it all and was now trying to work out a repayment programme with the Australian Taxation Office.

'How did you spend it all?' I asked.

'Well, you know, the house renovations were costing more than I expected and I needed some quick cash, so I drew it out of the company. You know how it is' he replied.

'No, I don't' I responded, 'but surely you knew this would leave you in a pickle. Didn't your cashflow forecasts show you this was coming-up?'

'Well, I did prepare those things but I don't really look at them' he replied.

A number of suitable responses filled my mind at that stage but I contented myself with telling him he should try to repay the money as soon as possible to the ATO and get out of their bad books.

It constantly amazes me that some place people ignore the single fundamentals of running a business. What's more infuriating in this case is that Trevor had run his employment for 12 years and had a constant turnover, so he should have known what were the critical 'cashpoints' of his business.

'Cashpoints?' I hear you say, 'What are they?'

'Cashpoints' are what I call those times of the year where your cash requirements are strange or extraordinary.

To give you an idea of what I mean, I have listed down town the most percentage types of outgoings that people seem to forget in re when planning for cash needs or would like to forget about.

1. Net GST payments (Remember, this is not your money, it is the government's);

2. Quarterly PAYG/IAS payments (This is payment of your income tax obligations);

3. Depreciable equipment (This is replacement/upgrade of furniture and equipment, computers, faxes, printers, etc);

4. Professional fees (A biggie! In more ways than one. Having a new lease drafted? You need a lawyer. Getting your businesses tax return done? You need an accountant. consumerism a patter for beside $200,000 or above? You'd improve warrant for a few thousand dollars in professional fees).

The major problem most businesspersons have is thinking solely in the air the direct inputs into their task and not looking at peripheral costs. Some businesspersons identify relevant costs but underestimate them, in the hope of making the cash end 'look good'. This is why those businesses experience cash flow difficulties and find themselves having to pull a rabbit out of the hat, down the track.

A cashflow forecast is not undertaken to make either 'look good'. It is undertaken to give YOU, the owner a realistic view of one case of how your proposition will perform.

If your cashflow forecast looks horrible, isn't it outdo to know here and there it now rather than when your reciprocal trade hits financial difficulties?

As they say 'cash is king' but you don't want to make the lack of it turn you into a 'joker'.

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