It is vital that you understand what has to be done to keep your business running and growing. The most basic number that you must know is your breakeven point. In simple terms, this is the daily, weekly, or monthly cost to the business of its fixed overheads – the costs that you have regardless of the level of activity. From this you can calculate how much income is needed just to break even.
With different credit terms for paying suppliers and being paid by your customers as well as different times for paying VAT and PAYE, you need to be able to forecast the fluctuations in your cash flow. Then you can budget for payments when they are due. If any shortfall is identified, arrangements can be made for short-term funding from the banks.
Cloud based accounting software has the tools to automate the budgeting and forecasting needed to control your finances.
