THE COMPANY’S BANK ACCOUNT IS NOT YOURS

It belongs to the staff, it belongs to the creditors, it belongs to the Government, it belongs to lenders and it belongs to the customers. You as the business owner and director and guiding light are only its custodian.

(In the interests of readability and space, hereafter, references to “he/his” are to be read as inferring multi-gender references and are not intended or construed to be in any way, shape or form,  gender discriminatory.)

Too too often a business owner sees the bank account of the business he has established with his own flesh, blood, sweat and capital as “his”.

It isn’t. What is “his”, is what is left over after the staff have been paid (including superannuation contributions), the creditors terms met, the PAYG-W, the GST, the PAYG and the payroll tax liabilities have been met, the lenders repaid, all from the receipts of the customers.

From the off-side of the pitch, if there isn’t money to meet the creditors terms there are no materials for the staff to use to produce, sell, deliver and account for what the business produces – goods and/or services, tangible or intangible. If there isn’t money to pay the staff there is no-one to produce what the business produces, there is no-one to sell what the business produces, let alone deliver what the business produces. Last but by no means least (in our minds anyway) there will be no-one to account for what the business produces – goods and/or services, tangible or intangible.

If there isn’t money to meet the obligations to pay any or all of the myriad of taxes, then Governments can take away everything he, the business owner, has worked for.

If there isn’t money to meet the obligations to repay the good folk who loaned him money to help him achieve his dream of being the business owner and director and guiding light then those good folk, too, can take away everything he has worked for, usually after the Governments have had a meal.

It goes without saying, but I will, from the on-side of the pitch, without cash to enable the business to produce its goods and/or services tangible or intangible, customers won’t be able to buy what the business produces which means the bank account will be empty which means no money to pay the non-existent staff, the creditors, the Governments and the good folk lenders, a business version of the infamous Catch 22.

If there isn’t money to pay the staff, the creditors, the Governments and the lenders then the business owner and director and guiding light gets to share in nothing as well, so it is in the business owner and director and guiding light’s interest to manage the business’s, not “his”, cash-flow.

He needs to know certain KPIs – not just concocted ratios but in terms of cold hard dollars (cents are getting more and more irrelevant). The dollar value and aging of debtors and creditors, the dollar value of the business customer pipeline are just a few.

The business owner needs, no, must have, systems to be in place, hard and soft, that can report simply and quickly to provide useful KPIs.

He needs to see indicators of cost changes, both up and down, via simple exception or variance reports. How much has the payroll varied this week/month to last week/month? Which staff members have more than the statutory leave owing? Are major suppliers’ payment terms up to date to ensure no delivery of raw material issues? With a bit of thought a list of useful KPIs can be constructed.

Are your systems, hard and soft up to helping you?

Of course, help is at hand – EBIT Management Services can review your business, can help you with KPIs and help you with reporting and planning.

I’m off to coach cricket.

Ka-ching – Cash is King