2016-09 - Small Business Cashflow without Spreadsheets

If you track income and expenses on a spreadsheet, you could be losing sight of how your business is performing and wasting a lot of time on data entry. There are low-cost alternatives that allow you to monitor business cashflow really simply.

2016-09 - Small Business Cashflow without Spreadsheets

Small business cashflow

Money in, money out. Cashflow is one of the most important measures of your business's health. But how do you monitor it?

It sounds simple to track sales on the one hand and expenses on the other – then compare the two. But a massive 65 percent of failed businesses say they closed down because of financial mismanagement, including issues such as lack of cashflow visibility. In other words, they didn’t know if they were making more than they were spending.

Why are people losing sight of cashflow?

Everyone knows a business needs to stay in the black. It’s not a new idea. So it can be hard to imagine why a business would lose sight of cashflow. Until, that is, you’re in business yourself. It’s then that you realise tracking small business cashflow isn’t as easy as it seems.

You have to:

  • keep track of all your expense receipts
    (which gets really tricky if there are multiple people making purchases)

  • record all your sales revenue
    (making sure to account for discounts you might have given)

  • enter everything into your cashflow Excel spreadsheet or Google Sheet
    (including double and triple checks to make sure everything is entered correctly)

You may have to rely on employees or business partners to supply a lot of this information. Their paperwork will sometimes have scribbled notes in the margins, requiring a follow-up phone call. It takes a lot of time, patience and energy before you’re even ready to punch the numbers into a spreadsheet.

Data entry slows you down

Your cashflow Excel spreadsheet or Google Sheet is probably a monster. The number of columns and rows will have grown substantially since you first set out on your own. Plugging in the numbers takes time, and a lot of it. Unfortunately it’s not a job you can rush because you need the spreadsheet to be as accurate as possible.

The large amount of time required results in two common issues:

  • The task gets pushed back repeatedly so you go for long periods without knowing your cashflow position.

  • Because there are gaps in your data, you’re not able to see how the business performs from day to day.

Mistakes creep in

No matter how much you slave over your spreadsheet, there’ll be mistakes. Up to 90 percent of spreadsheets contain data entry errors. You’ll find the big ones because the numbers will look wrong and so you’ll trawl through to find the cause. It’ll be slow, frustrating work but you’ll probably weed them out in the end. The smaller mistakes are more likely to sneak through, where they’ll add up, bit by bit, to undermine your data. It’s not great for your confidence.

Cashflow information is old before you see it

Even if you're vigilant, there’s a lag between when a sale or expenditure happens and when it’s entered into your cashflow Excel spreadsheet or Google Sheet. And you still won’t “see” it until you create charts or graphs from those spreadsheets. In this scenario, you’re taking a series of snapshots of your cashflow, and there can be big blind spots in between.

As business picks up – with more sales and more expenditure happening all the time – those blind spots become more significant.

  • More things happen in between each cashflow snapshot.

  • Cashflow snapshots get further apart because you’re too busy to update spreadsheets.