Managing small business cash flow and income in 2022
It’s been a lean time for small businesses, and especially the families supporting them.
Xero’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, business owners really need that to carry through to the 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
Here are four steps small businesses can take to help support their recovery:
- Analyse your business margins and focus on products that generate the most profit
- Create a ‘rainy day fund’ within the business so you’re not constantly loaning it money from your personal savings
- Schedule regular, sustainable drawings to ease home budgeting
- Keep your regular drawings modest, as you can always give yourself a bonus payment at the end of a good year
For more tips, advice and accounting essentials for your business, visit Xero Cloud Accounting and get started today with Omnis Group, or call our Xero cloud accounting specialists on 08 9380 3555.