Look into the books

Jeremy Tauri.

Have you had growth but feeling perplexed about your financial position? Feeling like your business is growing nowhere?

The numbers are good but they're unbelievable when looking at the cash available balance in the bank account?

Over the last three years I've seen many one man bands rapidly increased into a three or four-piece. It's a natural transition to cope with increasing demand.

As a result new costs have been added, more vehicles, tools, training, overheads and of course extra labour costs. There's extra going out of the bank account each week but pressure on to pay bills and get the work done on time. Surely that automatically means more coming in? The accountant says profit is up.

But where is the mythical cash? If you feel you should be richer than you are, you need to look at your balance sheet and find out where the extra might be going.

Cash Assets - Some people feel comfortable enough to pay cash for things like vehicles. This may put some pressure on your cashflow in the future. Check your asset register and see how much cash you've spent on assets over the year

Debtor's work in progress and stock - Some of us buy either time or stock to sell. How much of your profit is sitting in this area of your balance sheet? You may need to look at your terms of trade.

Borrowing and debt servicing - Lending is cheap but if you've made a commitment to pay loans back quickly much of your cash could be servicing interest and hammering down debt. How much debt have you paid back? How much cash has gone here?

Extra money has been spent on yourself - You make more and spend more. When I print out clients' lists of drawings they can be amazed at how much they've taken for themselves. This may mean a review of personal spending if there are other financial goals.

- Jeremy Tauri is an associate at Plus Chartered Accountants.