Episode #105 Planning for The Year Ahead: A look Into Cash Flow Reports

Tune in for another new episode of The Bookkeepers' Voice, as Angie Martin is once again joined by podcast guest and Senior Bookkeeper of ‘Off The Hook Bookkeeping,' Sharon Smith. 

As most of us know, cash flow mismanagement is extremely common and as bookkeepers we always talk about how important it is for our clients to understand their cash flow better. However, when was the last time you did a cash flow projection for your own business?

In this episode, Sharon and Angie will discuss all things Cash Flow Reports, including everything you need to know so YOU can plan for the year ahead for YOUR business. 

Key Takeaway: “Cash Flow Reports can help understand your bookkeeping businesses financial position to help you create successful short and long term goals and objectives.”


Podcast Info

Episode: #105

Series: General

Host: Angie Martin

Guest speaker: Sharon Smith

Topic: Planning for The Year Ahead: A look Into Cash Flow Reports

Read transcript

Summary Keywords: cash flow, cash flow management, bookkeeper, future proof, cash flow reports


Managing your cash flow to future proof your business


Angie Martin  0:01 

Good morning, everyone. Hope you're having a wonderful start to your day. My name is Angie. And thank you for joining us for another edition of the bookkeepers voice. Today, once again, I am joined by Sharon Smith, the senior bookkeeper and financial consultant from off the hook bookkeeping, which is Amy's business. And we're going to discuss one of our favourite topics, cash flow. Hi, Sharon, how are you?


Sharon Smith  0:33 

Great! Cash flow is my favourite thing!


Angie Martin  0:39 

It is it is. And today I wanted to do actually a big shout out to Tonya Willis from Willis Enterprises, which we were actually discussing cash flow forecasting and reports last year, in one of our free consultations that we do, and she and I had just a really lovely chat about how much she loves the podcast and how it inspires her to do more with her business and become savvy basically. And during the conversation. Like I said, we were talking about cash flow. And she was also one of the clients that really made me want to push to do this series because we love cash flow. And us as bookkeepers, we need to push more for cash flow for ourselves and for our clients businesses, because it's it makes a big difference, doesn't it?


Sharon Smith  1:37 

He everybody needs a cash flow for us.


Angie Martin  1:40 

It does. It does. So just want to do a quick shout out to Tonya, thank you for listening, and I hope you enjoy this episode. Now, let's get into cash flow. As bookkeepers, we are always talking about how our clients actually need to do their cash flow, understand it and how it will really help fix and remedy their cash flow mismanagement. Because it's one of their actual top problems that they have within their businesses. However, when was the last time you as an our listeners did a cash flow projection for your own business? Today, Sharon, and I want to talk you through doing cash flow reports to help you plan for your year ahead so that you can then better support your clients and their year ahead. I'm pretty excited about it. Hey, Sharon. Yeah, it's

Why is creating a cash flow so important?


Sharon Smith  2:45 

and I agree, as keepers, if you don't understand your own cash flow, it's very, very hard for you to then help your clients understand why they need a cash flow, and how important it is. It's a very, very useful tool for financial management, for planning for everything. And I honestly believe that it's something every business no matter how big or small, should have and should understand.


Cash flow management for your business


Angie Martin  3:17 

And I think too, especially with running your own business, especially a bookkeeping business, because it's but running a bookkeeping business is stressful. There's so much to do for clients on a weekly, monthly basis. And then you also have to stop and then try and concentrate on your own business. And by really being up on your own cash flow, formulas, your projections and everything. I find it helps de stress that you know where your business is going. I know. Yeah, like I was telling you before we even started doing this podcast that I really want to do this episode to really help support our listeners and really taking that step and doing that ongoing monthly cash flow report on their own business because I talked to some of our clients and they aren't sure if they can join our new savvy membership that they're so excited about at our bronze level, which is only $8 a week. And they're not honestly sure if they can do that. Which as a bookkeeper. It worries me because $8 a week really isn't that much to come to be able to say yes, I can afford it and my cash flow or No, I can't.


Sharon Smith  4:34 

Yeah. And I think the big thing that people need to understand is the difference between budgets and cash. Yes, because your budget will be using all your non cash deductions as well. Yes. Whereas your cash flow is only cash. So, for example, if you've got a equipment line and you're paying 100 $50 a week to that equipment line, it doesn't come on your your profit and loss because it's an it's not an expense item for p&l. But it's something that you've got to be able to account for in your cash flow, because that's money coming out of your account.


Angie Martin  5:16 



Sharon Smith  5:17 

That's where I think it's very, very important runs alongside your budget to know that this is what you're having to spend. But this is what we're also budgeting for. So, you know, you need to be able to know that in the next weeks ahead. This is what money we're coming is coming in. But then also, what do we need to pay for? You know, and so that way we can cash flow forecast and cash flow budget, all those bigger expenses, because I don't know how many people go, oh, but I've got insurance to pay for I've got this to pay for and this big expense. Where if you have that correct cash flow forecast, you know that it happens on this date, either every month, or every year. So you can plug it in and say I need to know that I've got this much money available.


Angie Martin  6:07 

Yeah, I love that. And you actually, it's so great. I love it when you already say what I was going to say. I actually had written that down that, you know, doing your ongoing monthly cash flow projections for yourself helps you understand your cash position and your clients cash position, so that you can pay your expenses, your bank loans, your taxes, purchase assets to allow for growth within the company. Yes, it's so important. And as a business development manager, this is what I always look at when I look at businesses as well. It's I you know, yes, paying your taxes, paying your loans, paying your ongoing expenses. Yes, that's very important. But for me, I always look at what needs to be purchased to help grow your business. That's right.


Sharon Smith  6:59 

Yeah. I want to get another employee, but can I afford their way? Exactly. So this is where you can actually put that increasing wages into cash flow forecast ago. How is that going to affect?


Angie Martin  7:11 

Yeah, and I know, there's a lot of bookkeepers right now, because of COVID that have become so busy a lot of solopreneurs are deciding to get VA is they're starting to get part timers or casuals just to come in and help. And a lot of bookkeepers actually are looking at doing traineeships and mentoring to help new bookkeepers to really start excelling within the industry, which I personally love. But again, they're just at the point where they aren't sure if they can actually afford it. And, you know, working with you and savvy and off the hook, I love our discussions because we can actually sit down and you can easily tell us Yes, we can do this. No, we can't. This is something that we can maybe do in six months, this is something that's you know, you can really be able to answer the questions of the mind mind going, what if we do this? Yeah, yeah.

Managing your businesses cash flow as a bookkeeper


And I know, it makes a big relief, you know, thinking of Amy as a client, instead of our, you know, boss, but you know, thinking, you know, you're the bookkeeper thinking of savvy and off the hook as a client, you allow her to have so much more of an idea what's going on and a daily basis, because you're doing the books, not her. Because when you do the books, it's a completely different situation, as well as when you do your own bookkeeping. So anyone who can afford, please definitely get someone else to do your books, so that you have someone from the outside looking in, because that makes a big difference as well. But because you do all that great work with the cash flow, and you know what's going on, it helps take away a lot of business owners stress and entrepreneurial stress.


Sharon Smith  9:13 

That's right, because when you're looking at it, you can go well, we've got all these expenses coming up. We need to increase sales. Yeah, it can be like that, or, you know, we have our sales is so great that yes, we can buy that new piece of equipment. Yes, we can hire that new person. And it's just looking at it from that point of view as well. Yeah,


Angie Martin  9:33 

it's great. It makes such a difference in you know, for solopreneurs it can be Yes, I can afford to take that holiday that I want. Yes, I can afford to redo my office in my home office or you know, yes, I can get my business car. Yep. Love it. Yeah, it makes it makes a big difference or even Something as simple as Yes, I can upgrade my computer system, I can get a new computer, it's knowing that you can do these things to further help the growth of your business, whether you want to actually grow in terms of getting the bigness, the business bigger. Or if again, you are solopreneur, you want to only work, you know, the 30 to 35 hours a week, and then when you hit max capacity, that's it, you can still grow your business at max capacity just in different ways.


Sharon Smith  10:30 

She, as you know, as you said, as a solopreneur that I want to do this personally. So can I afford to take dollars out of the business exactly myself to do that one thing, you know, as you said, like a holiday or something even, you know, small, like, I really like a new lamp stream, you know, can the business pay for that for me? Because of all the work that I put in?


Angie Martin  10:56 

Because I don't actually pay myself?


Sharon Smith  10:58 

That's right, you know, can I pay? We can actually say, Can I start actually paying myself? Yes, you $100 a week now? Yeah. Because what's the point in running your own business if you can't actually give yourself a wage? Yeah.


Angie Martin  11:12 

And it's, it is so exciting. When you can actually do that I know from just a personal but my partner just actually created made his solopreneur business. He had employees, but he actually made his business into our official company this past September. And he is now for the first time in 13 years paying himself a wage every single week. And to get to that point, he was so excited. And it was I've been saying that he could for a while but I don't do his books. It was his bookkeeper that sat down with him and said, No, you can actually have a very good wage every single week. Because that also then comes in to help when you put your cash flow into your budget as well.


Sharon Smith  12:03 

And that's what she did it because we're looking at reducing tax.


Angie Martin  12:07 

Yeah, exactly. Exactly. And that's what she did.


Sharon Smith  12:10 

And so that's where you need to actually use your budget and your cash flow combined together, because, but you need to understand the differences in what they show and what they tell you.


Angie Martin  12:19 

Yeah. And I always feel bad. You know, when I'm talking to our clients, and I, it's a new client, let's say and I'm like, Okay, So question number one, have you created a business plan? No, no, I've started it. But you know, haven't finished it yet? That's fine. That's fine. So first things first, you know, savvy is all about doing things in the right order. Make sure you do your business plan. The next bit in the business plan, I always check in to say, Have you skipped over that financial section in your business plan? Oh, yeah, it's all in my head, I don't really need to write it down. And then they get a bit sheepish, admitting that they haven't done their actual budget, and that they don't do a cash flow forecast. It's okay to admit that you don't.


Sharon Smith  13:15 

But most people, when they do that, they think they know, this is what I'm coming in. And this is what's going out. But they forget Little things like having a $10 a month bank fee does affect your cash flow. You know, and it's only a little bit, but it does affect it. And then they forget that they've got this state to pay, oh, I've got to go and pay for this now. Because you know,


Angie Martin  13:40 

so many subscriptions that you have to pay off subscriptions are the worst


Sharon Smith  13:43 

for cash flow, because people if you don't forget it, like oh, my God, I've got this coming out. And it's, you know, $150. And I forgotten all about it. And that's why it's important to have in your business plan as well as you can, you know, and that's why cash flow to say, you know, my cash flows are done weekly. But they're also done three months in advance all the time. Yeah, like, I know, I know that on this date. Every month or every week, this subscription comes in this payment, I can budget that I'm going to spend so much dollars on fuel because of running around cost of my car. You know, and all those other subscriptions. Like I'm thinking of bookkeepers, and it's mainly subscriptions, it's mainly subscriptions. I mainly subscriptions. Yeah. And then you know, do you want to actually put some money aside to put towards the household electricity bills and stuff like that because you're using electricity and there's things that you that are not thought of that you need to actually instal them there but then by also doing it three months in advance, you know that you're getting paid on this date this much money because you have those regular clients that will pay you weekly or monthly, or quarterly


Angie Martin  14:53 

if you just do their mouse or something you have quarterly clients that only current to your Come in having it


Sharon Smith  15:01 

that way, you know that this week, I'm going to have this much money coming in this week, I'm not going to have any because there's no weekly clients that are paying or, you know, it's only monthly on this date. So you can then forecast in the future that will I've got to be able to pay these bills which are coming out on this date. Now godless because I've got no control over stopping that. Yeah,


Angie Martin  15:24 

  1. And it's, you know, I always feel bad when I asked that question that if they have their own cash flow for their own businesses, and there's no reason to be sheepish about it, or embarrassed that you don't do it. Just remember, again, you are running your own business, there's so much to do, which is why it's really handy to actually get someone else to do your bookkeeping, because then they can do it. And it lets you separate yourself.


Sharon Smith  15:55 

I forgot to mentioned once before to you, Angie, that I used to work as a business consultant. Yeah, helping these struggling businesses. That was my job to help struggling businesses survive and get out of that, that down within, almost ready to close the doors. And the one business that always sticks in my mind that I worked with, was on 100. I think it was 190 something $1,000 loss per year. And in 18 months, I got them to a $4,000 profit. Yeah, but that means tool that I mainly use was cash flow. Yeah, that's how I did it, because they had no idea how they were paying their bills, week to week, month to month, until I sat down with them with the cash flow to show. This is what's coming in, in your sales. And this is what we need to project in sales every week to meet these demands of these bills. And it's the cash flow that did that. Not you know, yes, we had budgets as well. But keeping in strict OSH


Angie Martin  16:53 

Yeah, caches all that clutter.


Sharon Smith  16:56 

Yeah, what's coming into bank account what's going out. And that was how I saved a lot of pieces. Surely, on cash flow, which is why it's my biggest thing. I love it. I think it's the one and only thing


Angie Martin  17:10 

you always are so happy on cashflow days, it's so funny. Every time I talk to you, you always have like this massive smile when it's cash flow day.


Sharon Smith  17:20 

You know, I just know how important it is for businesses to happen, no matter what the size of the business, you know, whether you've got yourself only working, or you have 10 employees, or 100 employees, that's something that has to be there to know where you're going. Maybe it's more important than looking at a profit and loss.


Angie Martin  17:41 

And, you know, it just makes a big difference as well. I think if you don't do your own cash flow, I know you know, before you started to do savvy and off the hooks cash flow, Amy was doing it. And Amy is incredible at doing all of her bookkeeping requirements. Like she's an amazing bookkeeper.


Sharon Smith  17:59 



Angie Martin  18:00 

But once she was able to step out of doing it, she was able to get the real entrepreneur almost like the service that she was giving her clients, she was able to that service back where you're doing it, you have no emotional ties, you have no emotional, you're just looking at the numbers. And then having her review them and being like, What was this? Can we take this out? Is this really unnecessary? Going home?


Sharon Smith  18:32 

And that's exactly it. Because while she's grinding cash on cash flow is different my cash flow, and because of the way I presented my cash flow to her it was like, Oh, you know, there was some expenses that she was not aware of. Yeah, that was so large. Like she was aware of the expense. Please don't get me wrong there.


Angie Martin  18:52 

Yes, she knew that number, but she didn't know. You know, and that's the same with everyone thoughts, you know, cuz you're so in your business. You're like, Yeah, I know this. This is obviously I know. I'm a bookkeeper. Yeah, I


Sharon Smith  19:06 

know. These books.


Angie Martin  19:08 

Yeah. It's when you get someone else to do it, present it in a different way than you usually do that you can really sit down and be really mindful of things. It's like a doctor isn't a doctor for themselves, they have a doctor for themselves. It's the exact same thing you know, it makes it completely different. So what I thought we would do today created another list guys. Just because the last list was so great. And I loved your feedback, Sharon so what I've done is I've created seven reason bookkeepers should do monthly cash flow report. And when I write this, like when I say this, I mean for yourselves and for your clients. So this is the kind of a double whammy so it's for both yourself. clients and for yourself. So we'll talk about kind of both avenues of it. My number one reason is short term planning. Because if COVID have has taught us bookkeepers, anything, you need to be up on having some short term plans to get through anything that comes up.


Sharon Smith  20:23 

Whoa, can throw anything at you.


Angie Martin  20:26 

Yeah, so short term plans,


Sharon Smith  20:28 

particularly in the service industry, you just don't know how long that service is going to be required.


Angie Martin  20:36 

Exactly. So I thought, you know, the number one reason would be your short term planning. And this can be everything, it can be your key performance, performance indicators, which is KPIs if anyone ever sees that acronym, thrown around places KPI means key performance indicators, which really helps assess if you have a team or just yourself the progress of your business. And mainly it's used for sales, but it goes for management, client retention, everything. But then I also will help with a cash flow forecast for personal development. Because as bookkeepers, there's always more personal development you can do was something you've got to keep on top of particularly as a best agent, you know, yes, to so many hours a year to keep that licence? Yes, definitely. And again, put personal development, because the last year as well, there was a lot of development personnel that needed to be done. There was so much information that needed to be ingested, basically. And then it can also help you with your actual marketing. You know, a lot of bookkeepers are realising now that now that we're more virtual, you need to actually invest in your marketing, keeping your cash flow up to date on a monthly basis, we'll let you know, what kind of marketing you can do.


Sharon Smith  22:12 

That's the end, like, as you're saying with KPIs, I mean, you know, when it comes to cash flow forecasting, you can have that one line, that's just as sales or income, guess what, you can drop that down into different areas. So we do. Yeah, which is what we do. Yes. So that way, you know, you can look at saying, Well, I'm budgeting that we should be doing X amount of dollars in bass logic, is that actually happening when you're actually looking at the cash coming through to your business, or if you know, you're doing it for your clients, and they need a certain number of, you know, percentage of their income coming in as this particular sale or that particular sale? You can look at that through your cash flow saying that this is actually coming through. So you can keep an eye on that. Yeah, really easily. And from a sales


Angie Martin  22:56 

point of view, I love it. When we do that. And we break it down between certain sections. And I do this even within my own business, which is a product based business, I have certain products that I know are the top sellers that I make a lot of money off of. And they're the ones that I shouldn't be pushing. It goes the same for bookkeeping businesses as well, like you said, If you aren't doing if usually your bass services, are your top earners in there not right now. Okay, so we need to be focusing, yeah, we need to be looking at that. Why is that? And does it have to do with your marketing? Are you not mentioning your bass services enough? Do you need to end this?


Sharon Smith  23:40 

also other services that can be provided not, you know, not just bookkeeping, and best services, you know, you can be going out saying, Well, I'm happy to come in and provide a recording service for your business, you know, your books, and I will just take that information and put it into something that you can read. So, you know, there's all of that type of stuff that you can look at, you know, and help you forecast for yourself as well.


Angie Martin  24:08 

And it really does help me You know, my head always goes in savvy about, you know, what's working, what's not working, and even just thinking of it from a client perspective, when you and I have our cash flow meetings, it really helps me understand what our clients are needing because typically within the month, I can tell what our clients are going through in regards to the templates or in regards to our services that we're selling. If you guys typically typically months where you buy a lot of templates from us. It's usually because you're extremely busy and you just don't have the time to do it yourself. And you just need one right now. We had a lot of that during COVID.


Sharon Smith  24:57 

Could that have been jumping


Angie Martin  25:02 

Maybe, maybe. But because of that, that was able for me to then help change my conversation around and make sure that we were talking about things that were specifically on your mind. That's why last year when Maya and I first started doing our kind of website series in sales and follow up series, we then did another series right back to back to it about onboarding, because we ended up noticing that so many people were looking into our onboarding templates, and that they wanted help and support with it so that we did the podcasts on the templates on the onboarding section. And you can do the same thing as bookkeepers. If you're noticing people are looking into the services and getting them with you, well, maybe then you need to be writing a blog about how, you know this can further help you so that more people who aren't your minds, potential new clients can understand it, and then come on board with you. And you know, also if it's a reporting system that you know, your clients need, but they're aren't doing with you, you can then also do a blog or something like that, to help educate them, like cash flow.


Sharon Smith  26:26 

Many businesses do not have it. So yeah, if you as a bookkeeping service, have your cash flow, understand how important it is to you yourself, it's easier for you to then sell that service on to your clients that you do that for them, exactly, therefore increases your income, which increases the dollars that you can have for yourself. And ultimately, he says, your cash flow, yes, which helps you provide for, you know, your personal development and everything else. So it's always good to know, in your cash flow, where you can expand that the top line that income, but at the same time, you know, the cash flow then helps, as you know, the short term planning, what funds are available


Angie Martin  27:12 

for those immediate expenses? Exactly. And that I think is, especially this last year, this has been the biggest thing that has really helped. And you can tell the businesses who had the short term planning sorted with their cash flow, because they were very easy to make very quick and important decisions right away. And you know, whether that's getting new assets, whether it's assets as an employees or new business systems, programmes, upskilling programmes, anything, it really makes a difference. My number two, my second reason number two reason for doing a monthly cash flow report is knowing where your money comes from and where it's going. This is important. And again, as bookkeepers, we know what a cash flow budget is, I'm not saying we don't know this, I'm just saying by doing a monthly report, you can actually see it.


Sharon Smith  28:17 

Yes. Yes. But it's all those little things, especially where the money went. All those little things that you forget about, you know, it's that subscription that you've got through Apple that's coming through, that's only $5 a month that you forget about.


Angie Martin  28:33 

Those are the ones that get there the one that tiny wee ones that you never remember. That's right. Your merchant fees.


Sharon Smith  28:44 

They, they're any little but they can be you know, really send you into a tears.


Angie Martin  28:50 

Well, for my business, I use PayPal. And I always forget how much PayPal takes out of a purchase with PayPal fees. It kills me every time I know it, but I it's not until I do my monthly cash flow where I go in and I see where my money's gone. And then I'm like, Oh, what is all this? I'm like PayPal.


Sharon Smith  29:12 

But then it's like you know, because PayPal fees kind of straightaway go up and hang and I saw the $100 Why don't only got 90


Angie Martin  29:19 

Well, that's exactly what I do is I yeah, I reconcile all my actual orders as well. So be like okay, so I sold this skirt. I have a skirt that's like a flat rate of $100 and every single time I'm like why didn't I get 100 Don't


Sharon Smith  29:36 

forget you do you do forget about those days? Yeah, so but it lets you know and if you plan your cash flow properly, you can actually see that, okay, all this money that's coming in, I can see it's coming in from this, this or this sale, then helps you planning for the future going well. Most of my income is coming from here is that something where I should now expand on my marketing because it looks like it's the most popular thing or I'm not getting a lot of sales through here. But it's so easy. And it's such a big profitable thing. I need to push my marketing from that, because I'm not getting that type of sale. Yeah.


Angie Martin  30:11 

And that that's important for for bookkeeping as well. And it's, it's also to if all bookkeepers have a service they prefer to do. Yes. You love doing your cash flow flow reporting, yeah, Amy, I'm going to do what she doesn't like to do, she doesn't like to do payroll. So it's always good to check how often she has to do payroll, and what income is coming in for that, so that maybe she can promote doing health checks rather than payroll because she loves doing health checks. And you know, it, it all works really well. So knowing where your money is coming from, and where it's going, it can really help make you love your business a bit more. Because then you can be like, okay, so I love doing this. So I always promote it. And because I always promote it, and I love doing it. I'm making so much more money from it from everything else. So should this be, like my main service? If I haven't already made it my main service? Because that makes me excited to come to work every day.


Sharon Smith  31:23 

Yeah, it'll also be on the other end that money doing this, but I really don't like it, I'd rather do this.


Angie Martin  31:29 

Yeah, so maybe you need to hire someone else to do that bit. So you don't have to do it. You know, it's um, it's just really understanding where things are coming and going, and it makes a big difference. My third, I almost put this as my first reason, simply because it's super handy. But I put it as my third instead is creating extra cash. Honda comes on from what we were speaking about, I guess. That's why I was like, I kind of put it in order for


Sharon Smith  32:08 

it kind of comes in because yeah, you can look at where your money is coming from, know, how can we create extra cash? Because if your, your say your spendings is kind of like coming up going, Oh, you know, in three weeks time, I'm going to have a negative bank balance. Yes, you can look at it going, where can I get extra cash? You know, and, you know, I'm


Angie Martin  32:31 

going to be honest, we do this at savvy, we know when there's a big influx of cash going out. And so I plan things around that. And I may want to be seller,


Sharon Smith  32:43 

what? what's easy coming in?


Angie Martin  32:46 

Yeah. And that's what you do when you have a business. That's that's just what


Sharon Smith  32:51 

it also can be used for creating extra cash. Because I know that I want to hire another bookkeeper, because I don't want to do job A, which I hate doing. I need to create extra cash to be able to afford that new bookkeeper. What can I do to do that? You know, and there's a lot of multitude of things, but I suppose that a lot of people don't think of including grants,


Angie Martin  33:15 

yes. And grants, there's so many opportunities,


Sharon Smith  33:18 

opportunities in grants on how you can actually create that extra cash flow. So, you know, having that cash flow up to date, will actually help you look at that. And it helps


Angie Martin  33:31 

you get the grants as well, because you can actually submit the proper information that they want, without you having to do an extra like five hours amount of work to get a grant that you might not actually get.


Sharon Smith  33:43 

Yes, because I'm not easy. But yeah, there's there's ways you know, to create the extra cash for the extra employee or to create the extra cash because you need a new computer. Yours is just so old, it's just like, Oh, you've heard about this new programme that's going to help you so much in your business world, you know, and you knew that extra cash, looking at what's coming in, can help you create that, you know, to give you the ideas on what to do. And sometimes you may just look at and go, I have no idea how am I going to get extra money? What now what do I need to do? Because there's a lot of instance, instances where that does happen, you know?


Angie Martin  34:22 

And that's where I always look at, you know, there's the two, two bits of the cash flow is the gaining money and then the spending money. Typically, if it's hard for you to gain an extra bit of money for the next month, we'll maybe you need to look at something and see if you can shred an expense.


Sharon Smith  34:43 

That's that's which ultimately gives you extra cash. It does you think that what you've looked at what you've actually spent and go Is that necessary? Hmm. And are you subscribing to something that you've not actually getting any worth out of


Angie Martin  34:58 

it Exactly. And yeah, that's just a really big thing to always think about. Because Yeah, bookkeepers, you have to have so many subscriptions. And sometimes I I'm guilty of doing this myself is, as a business owner, you have so many subscriptions that sometimes you just go, yeah, okay, I'll just upgrade the subscription or I'll get the subscription. Let's renew it up for renewal. Again, I'll


Sharon Smith  35:23 

just take I'm just gonna take it


Angie Martin  35:24 

because I'm too busy to look into anything. And sometimes it's worth looking into things. I'm reading a book right now. It's got a hilarious name. It's called kill bills. Instead of kill build a movie, it's kill bills. And I've just started it last night. I absolutely. It's hilarious. It's such a good book. But it's going in and, you know, do you need to every quarter sit down and spend half an hour reviewing the ongoing subscriptions you have? Are there any that you can downgrade? Are there any things? Like if you have your own office space? Can you negotiate your rent? Can you negotiate your water? Can you negotiate your gas, your electricity? Exactly, right?


Sharon Smith  36:11 

Yeah. But also, is there something better out there that could be either, you know, be more useful that you could get rid of two subscriptions to pay for the one exactly is, there's a lot of things, you really need to look at some of these subscriptions? Because I noticed what I've done with them off the hook.


Angie Martin  36:27 

And it wasn like, we, I remember you doing it and you're like, Oh, we can get rid of this match. And this and we can combine it into this and


Sharon Smith  36:41 

this foreign like, Oh, I don't know.


Angie Martin  36:43 

Yeah, there's so many. I don't actually know what that's for. But it makes a big difference. And it makes a difference in the long way, as well. Like, and it doesn't take that long. Like I think a lot of people don't do it, because you go, Oh, it's gonna take me five hours.


Sharon Smith  37:03 

But if you keep it up to date, on a regular basis, exactly. I mean, on some businesses I've worked for it was a daily thing. And I just spent 10 minutes every morning, and I would go through yesterday's bank transactions and put them into my cash flow. And I would have everything allocated, that, you know, this week is what I think should be coming out. And if it has come out, I would colour it red. If it hasn't come out, I would leave it black. So I knew to still expect it. So at the end, at the end of the week, I should still have this much money in the bank. But that way I could say, Oh, this has come in and I forgot all about that. I best put that in for the next few months as well. Because it's an ongoing thing because you forgotten that.


Angie Martin  37:46 

Yes, it makes such a difference. And it makes again, it just helps take that pressure off of Yeah, when someone like me goes, can you afford $8 a week and I can hear the panic in potential clients voices when they go now? I don't know. And again, it's not anyone's fault. You're a busy business owner. Life happens things happen. You can't expect yourself to be perfect all the time, or do everything yourself. Why maybe get yourself a bookkeeper.


Sharon Smith  38:22 

But let's see, I mean, cash flow, keep it up to date, you know, depending on the transactions, you know how many transactions go through your bank. I mean, for off the hook, I only do it once a week, every Monday, I'll go through and update it. Ya know, but I've been in businesses where it was a daily thing. You know, how big it depends on how big everything is. But so you know that this is what's come out. This is what's due to come out. You know, in three weeks time, is my bank balance still going to be in the black? Or am I going to be in the red and I need to do something about it. Yeah, it's all about that forward planning. Yeah.


Angie Martin  38:58 

Which takes me into my next reason. future proofing again, yeah, last year


Sharon Smith  39:11 

COVID Oh my gosh, how many businesses shut their shops? How many businesses like I know, friends personally, you know, their, their, you know, hospitality industry was closed here in Melbourne, you know, almost non existent. It was non existent the hospitality industry for months. So, if you have a client, like if you're, you know, in Melbourne and you had a client that was in hospitality industry, best thing that we're gonna cut your bookkeeping service.


Angie Martin  39:42 

Yeah. Which should have been the last thing to cut because you would have been the one to find extra cash and along the way, but


How to future proof your bookkeeping business


Sharon Smith  39:50 

that's it if they have if they have nothing coming in and nothing going out. They're not going to need your service. So you need to get a future proof. And future proof is in one week future, one month future 12 months future. So I still consider one week as a future proof. Yeah, you got enough money in your cash flow survive next week and all the bills that are coming out because you've got this loan payment or this? No,


Angie Martin  40:18 

  1. And I think I think I mentioned it was last episode of the episode before on how my partner he likes to have three months of wages. Yes, in the account at any moment, just in case something happens.


Sharon Smith  40:33 

Because Yeah, you need that you staff is one of the big things. When I do my cash flow, I have it set up in my spendings in the the must F and another section on, you know, what we need to spend, and the must haves are things that you've got no control over like bank fees come up with you like them a lot, you do? Come out, you cannot stop them. And GST? Honestly, tax and GST, you know, but but the thing is that wages is one of my must dues you get your employees, but paying for your creditors paying for, you know, other things, I put them in a separate section, because if you don't pay it this week, maybe you can pay it next week, but wages,


Angie Martin  41:18 

you need your employees, anyone who has employees, you need your employees. Yes. So,


Sharon Smith  41:26 

but there's also legislation and law that states that Well, yeah, that employees must be paid within certain. I know, when I worked in the construction industry, under the ABA that they were in, if they were not paid within 48 hours of the end of the week, then all wages are doubled.


Angie Martin  41:46 

I didn't I was double?


Sharon Smith  41:48 

Yeah, no, but this was written in the ABA that they had for it. So it's not necessarily everyone, you've got to be careful what an ABA has in it, because the ABA that this company had, if their wages were not in the bank, within 48 hours of the end of the week, of the working week, wage is a double time. So with that, you have to keep an eye on public holidays, to make sure they're paid in time or otherwise, it's doubled. So, you know, any of it is that was an exception. You've got to be careful of wages and legislation and stuff like that. Make sure wages are paid. So your partner very sensible, having three months with the wages, always there to make sure he can cover them.


Angie Martin  42:34 

No, and it's so important to you know, thinking of it. Now, as you know, something for your clients as well is a lot of our clients have product based clients, or clients who have a rental location to do their business. They need to be able to pay their office rent, they need to be able to, you know, my business is a clothing business, I need to be able to order stock before I sell it. So I need a large amount of income saved up to then make more income and expense. I know it's going to happen. And it's something that needs to be done on a weekly basis and a monthly basis to keep on track of it. And,


Sharon Smith  43:23 

you know, supply needs to be future proofed for that.


Angie Martin  43:27 

Yes. And it's something that I find, when you talk about it like that, when it's in relation to something that is really important to the business. It makes it easier for the your clients to understand why you need to go through this with them. Yes, because, you know, I'm from the industry, but fashion, people are notoriously careless with their cash flow. They legitimately do a look at it. Yeah, they look at their bank account, and they're like, No, no, we're fine. It's like, Well, no, no, in two weeks, you have to pay $20,000 for a new order. Do you have that right now?


Sharon Smith  44:06 

That's correct. You know, and a lot of things, you know, for wholesale industries, it's like that, you know, like, you know, we're putting in an order for products, you know, for the wholesale, whether it's a red track or something else. Yeah. You know, I deal with a company that imported tools. Yeah. And now, accounts every month, we're like, $90,000 that you're buying for yourself. You've got to have that cash.


Angie Martin  44:31 

Yeah, you have to and it's so important to help put it on their level of things that they care about to help them understand why they need to future proof it. You know, like I said, rent, rent, everyone understands the need to pay your rent. Everyone gets that. So, it's, um, it's just I find it's always really helpful when you put it in kind of terms to help them understand why they need to future proof? Because if you can't pay your rent, you know, yes. Luckily, during COVID, there were a lot of ways that, you know, people relief and businesses were supported. But that's not going to continue


Sharon Smith  45:18 

forever. And if you've got a client that actually ends their income, rent, yes. Yes, it was a real big thing and a catch 22. That owns the premises, we're having to give up their income, but they still have their expenses of paying their mortgages on those in Yes,


Angie Martin  45:43 

yes. So it's a big thing as well.


Sharon Smith  45:46 

Yeah. And so as bookkeepers, I think, this is why we need to understand future proofing. If you're working for yourself, and you're at home, and you don't have employees, and you just work out of a home office. No, you might not have all those big expenses, but you must understand them to be able to help your clients that, you know, looking at your look at your biggest client and look at the expenses that they have, on a weekly basis, a monthly basis in go. What if that was you? You know, are you sure that you could have that money all the time, you know, to pay for the rent to pay for that big loan payment that they also have, and, and stuff like that. So if you have that understanding and yourself, that makes it easier for you to be able to sell that the product of doing a cash flow to them. Because also, unfortunately, as bookkeepers as I know, you can have the client today. But tomorrow, they may decide that they don't need your services. So you need to make sure that your business is future proof that if your biggest client decided that they were going to have an in house bookkeeper, rather than use your services, how does that affect you? Exactly? How does that affect you? Yeah.


Angie Martin  47:00 

Which kind of leads me into my next point? A little bit. My next reason for having an ongoing monthly cash flow is to create an optimal balance of cash, which, just having that there doesn't really need much self explanation kind of thing for our members, our listeners, but you know, having that balance of your cash flow,


Sharon Smith  47:31 

yeah, makes a massive difference. Yeah, it's like your ending bank balance in your transaction account. What is it, you would like it to be, you know, you want a minimum of this amount of money in that account? But then also in your savings? Which is your future proofing your business? How much money would you like to have in that? Which can be really bass? Yeah. Well, and


Angie Martin  47:53 

that's I know, a lot of companies that do that. It's a great idea to do. Yeah. But you need to have that ongoing check in,


Sharon Smith  48:02 

you need to know. And until you've actually got months of cash flow organised, you may not know what that optimum level is. Exactly, exactly. You might not never know what that is until you've actually done cash flow, and projected it and actually have got past three months past cash flow to actually know that. Well, I thought I only needed $10,000. But realistically, I now know, I need 15. Yeah, I need 20 hours where,

Understanding cash flow reports


Angie Martin  48:32 

yeah, that and to be fair, I'm going to bring up my partner again, because I've just been so proud of him these last few years, where he was one of the ones that he would see cash in his account. And he was like, yeah, great, awesome. I'm doing great. And last year, as he started to employ more and more employees, I sat down, I was like, okay, we need to make sure every single end of month because he pays his employees monthly, every single end of month, he was going and getting super stressed out, super stressed out because, well, he didn't know if he had enough money. That was the whole thing. And so we sat down and I was like, okay, your optimal balance of cash you need to have for end of month for your employees is this much. And now he can sit down himself and look at the cash flow reports that his bookkeeper does and goes, Okay, now I need to increase it. And he underneath it makes him feel so much better.


Sharon Smith  49:29 

But also, you need to look at things and go, which is what I've done. And are you saying he pays monthly for his cash flow? Is he better off paying weekly? Because it's easy to find that money? You know, that's the same with insurances, which is can look at, I pay my insurances, really, but should you pay it then monthly because that helps your cash flow to find something once a month rather than once a year? Yeah. You know, and you need to look at those type of things to help your cash flow. That's not the best, you know, is are you better off paying your best monthly than paying for it? Is it easier to find $5,000 a month than it is to find $15,000 every three months? Because it's hard to get that through. So when you're looking at your optimum balance of cash, you've also got to look at the way you're paying things. And should you not pay them yearly, quarterly, but try and pay them weekly?


Angie Martin  50:30 

Absolutely, absolutely. And that really takes it into the next reason of being able to properly analyse your working capital, which that's Yeah, that is so important. And you're so good at doing that as well. And explaining it, I find, I don't know if you know that, but you are. Just Fun fact. But this is so important to be able to understand and then have a critical analysis of any businesses working capital and see, yeah, just to help them continue and grow. Again, doesn't need much explanation, that one, everyone else


Sharon Smith  51:18 

goes straight into it. You're working capital. Yeah. Now, you know, are you better off looking at other ways of paying? Yeah, I love it.


Angie Martin  51:25 

So what I did was, I thought I'd finished this list on a cute little bit, and put it, we started this list as short term planning, then we went to making sure you know where your money's coming from, where it's gone, helping you create extra cash, future proofing your business. So you can have an optimal optimal level balance of cash, so you can't analyse your working capital. So that leads us into our seventh reason, long term planning. And this is one of I think, cash flow. My favourite things with cash flow is short term planning and long term planning. Because I am a massive planner, and I always have goals, and I have the long term and short term goals, my


Sharon Smith  52:14 

husband and same with me because I'm the same, you know, I'm a, I'm a planner. And I will say I want to do this. Yes, in my mind. In my mind, it's 12 months time in his mind, it's today, and it drives him insane. You know, I love my long term planning, and I couldn't live without my long term planning to know what, where I want to be in 12 months time. In five months time, and cash flow, we can do that. Where do you want your business to be in 12 months time? You bookkeepers out there? Do you want to be sitting by yourself? Or do you want to have a team of three or four as your long term planning? So how are we going to get there? And we need a cash flow to do it. So we can apply that first one in that second one? Yeah, yeah. Now, or is it you want to retire in five years time? Yeah. And


Angie Martin  53:05 

that's a big one. And I actually know for a fact we've got I think there's about seven. Right now that I'm in the midst of talking to other savvy bookkeepers that are about some are three years away, some are five years, and then some are about seven years away. Yeah. And that's a big, exciting thing to start planning for, especially for a bookkeeper. Are you wanting to retire? And are you going to shut your business? Or are you wanting to retire and then hire someone on so they can take over the business?


Sharon Smith  53:38 

That's right to keep that income through? Yeah, no, because retirement is something I'm looking at now. I'm hoping to retire in 10 years time. You know, my husband looks at me and goes, I won't be enough gone here. I know you are very tired. But how are we going to afford to retire? You know, you can't rely on superannuation. As much as we thought we could?


Angie Martin  54:01 

No, and I think COVID helps with that as well. I helped reminding everyone that, you know, it only goes so far. It only goes so far. And I think nowadays you can't rely on the old age pension.


Sharon Smith  54:14 

Yeah. And having parents that do rely on it. There's not a good way to go. So yeah, you need to build a long term financial plan. And the good thing is that yeah, if you're a bookkeeper with a business and you've got people that are employed, if you can slowly just sit back, let them do it, you're still gonna have that income coming in so you can do what you want in retirement,


Angie Martin  54:36 

living the highlife live the life you've always wanted. That's the point of working so hard and then retiring. That's right.


Sharon Smith  54:41 

You know, as I've told my husband, I don't want to retire at 17. I want to retire at 60. Yeah, I still want to be young enough and fit enough to enjoy life. Why should I go into retirement when I'm stuck in a wheelchair and can't do anything? That's exactly I don't know. We've got to be able to afford to do that. So you know, and that's where you can look at your business. As goals, your business planning to help you be able to do what you want to do, yeah, whether it's going to say, you know, going into semi retirement first and then following the time? Or


Angie Martin  55:12 

do you want to do that? Or or don't need to do that? Or


Sharon Smith  55:15 

you could be 25 and going, I want a child? Oh,


there's a woman with three children, you know, because children are expensive? And how are you going to plan to do that you maternity leave, you don't put them in childcare? Is this, you know, that extra expense? That they do digitally? It is,


Angie Martin  55:39 

it's, you know, and it's one of those things. Yeah, you need to plan or I didn't even write this one down. But you know, do you want to go on a month or three month holiday? Are you you know, are you older? And do you know that your children are planning on having children? What kind of involvement Do you want with your grandkids that needs to all be thought about as well. You know, all those things,


Sharon Smith  56:05 

all those things, my daughter wants me to retire early, so that I can be a full time grandmother looking after her kids.


Angie Martin  56:15 

So no one else can really see what just happened. But Sharon just made the cutest face. alinda members and our savvy membership just saw the face, but made an amazing face of a way of saying no, that's not happening. I love the way we do podcasts and get to see


Sharon Smith  56:43 

cash flows. I've got a lot, you know, personally, for yourself your own personal, you know, day to day, living with wages, you know, do them for your business, do them for your clients, they help so much, which is why I'm so passionate about them. Yeah, they make


Angie Martin  56:59 

they make such a difference. And you know, whether it's short term, long term, everything in between, yeah, it will just help reduce a lot of your ongoing stress and make you feel a lot more in control of yourself, your, for your family and for your business. And for your clients actually, as well. Let me


Sharon Smith  57:21 

you know, what was it word of mouth is the biggest advertisement. And if you've done that awesome cash flow for your client, and they go speak to someone else, hey, you need to go and see so and so. Exactly. Cash Flow increase.


Angie Martin  57:34 

Exactly. It's awesome. No, yeah. Thank you so much for joining me again, Sharon. It's, I love working with our clients and hearing your passion coming through with the cash flow reports. And, you know, as a business development manager, I love being able to have a meeting with you and come away with such a clearer picture of how the businesses are going and helping me direct the rest of my day to day business, you know, on, you know, making sure that, okay, our clients need more help with templates, because they're super stressed out, I need to make sure that I am making them aware of the templates that we have, so that we can help and support them. I need to check in on people that I know we're interested in getting templates to see how their stress levels are going to see if there's anything we can help with then it makes such a difference.


Sharon Smith  58:34 

So one of the things that I love, you know, working at off the hook is, is that ability to be able to help so many people yeah, you know, I've not just got one business I'm looking after this several and and I love I love being able to share my experiences to be able to help more people get what they want in laws. I mean, last to short. Yeah, yeah, last to short, we're gonna be I've enjoyed my club AZ. Love it, love it. And


Angie Martin  59:03 

I hope I'm pretty sure you would have helped a couple people with a few of your ideas that you had today. And also just, again, spreading your passion. It's so inspiring. I know. To be honest, I am probably after this going to be taking a look at my cash flow. As I just I've always get so inspired when I talk to you about it. So if anyone would like to go online and say thank you or say hi to Sharon, please feel free to join our Facebook group, which is I heart bookkeeping. Just make sure you're always answer your the questions that we ask so we can actually admit you so you can then take Sharon and say hi to her. But thank you so much, Sharon. And I believe we have one more podcasts to do. And it's another list. Yeah, yes, it's another list. So it's going to be a fun one where we're just going to go through a couple different scenarios. And you guys get to enjoy learning from Sharon one more time, which is great. Awesome. So thank you again, Sharon. I hope you guys learned a lot about cash flow today and why it's important for yourself and for your clients, not just your clients. And as always, stay safe and stay savvy. Bye, guys.


Sharon Smith  1:00:23