The first thing a cabinet maker should do in order to begin to control the cash flow of the company, is to list all of the necessary purchases for the organisation including:

  • Tangible assets – inventory and equipment
  • Services – such as insurance and power
  • Costs of people involved

 

Once you have made this list, you can draft a budget for your company. A budget is a financial plan for your business. It enables you to plan your finances, set your goals and reduce cash flow problems in the future; you may also discover opportunities that you have been overlooking.

Twelve essential cash flow tips for managing cash flow for a cabinetmaker:

  1. Make realistic goals.
  2. Think of your budget as a way to achieve your goals.
  3. Make sure you can track expenses and earnings accurately.
  4. Leave contingencies in your budget for the unexpected. Cabinetmakers can’t always predict with certainty the ebb and flow of the market.
  5. Be careful with your cash flow especially if you are in a seasonal market.
  6. If you have been in the business for a while, use your history as a guideline.
  7. If your numbers aren’t adding up, have a look at the industry for benchmarks to give you an idea of the kind of ratios you should be using.
  8. Differential between fixed and variable costs.
  9. Make a best and worst case scenario budgets and know that your business will fall somewhere in between.
  10. If your sales income is ten percent or twenty-five percent below expectation then look at the effect on your cash flow and work out the savings you should be making.
  11. Discuss your budget and goals with your business coach in Melbourne to help you prepare the information in the way that suits the requirements of a bank, which will give you a better chance at raising finance if you need it.
  12. Your cash flow forecast is as important as your budget and will alert you when you have working capital shortfalls.

 

If you follow these guidelines you’ll be able to provide a stable cash flow for your cabinetmaking business in the long term.