Knowing how much money you have going out, and how much you have coming in is the key to a successful business. Of course ideally you want a great deal more coming into the business than you have going out if you want to make a profit, which is of course the whole point.

Cash flow is the backbone to any business and being able to quickly turn your assets into hard cash is also essential. It doesn’t matter what assets you have if you are unable to turn them into cash for a long time. By the time this has happened you could already be faced with debts and insolvency and be thinking of solutions such as bankruptcy or an individual voluntary arrangement to break free of debt. If you are in debt or close to debts then you need to speak with a specialist debt manager and ask debt management questions so you know what options are open to you.

There are many ways that you can help yourself despite having a good accountant behind you. Knowing the workings of your business is essential and goes a long way to keeping the business running smoothly and profitably. Keeping a balance sheet and knowing what you are doing with a balance sheet is imperative as this is where all of the outgoings and incomings are shown. These could include things such as:

• Current assets and current liabilities
• Net current assets which are known as the working capital which is a representation of the company’s ability to meet current cash needs
• Total assets of the company which is a combination of both fixed and current assets
• Money you owe out such as for loans
• Capital and reserve
• Profit and loss which is what it costs to manufacturer and deliver goods/supply a service

Being able to balance all of these or your inability to be able to balance then determines whether your company is a success or a failure. 20% of all businesses that start up fail within the first 2 years and many of these fail due to poor money management. If your business is showing signs of failing then you should seek specialist help at the very first signs and by seeking help for your debt questions before you are up to your neck in debt could make all the difference between keeping your company from insolvency or whether you go under.

With the new technology of today, computers give us one of the easiest forms of working on a balance sheet. Such programs as Excel or even open source programs are available freely for download. Gone are the days of paper and pencil, a spreadsheet on the computer is so much easier and more versatile. Software such as this makes flexible budgeting and managing the balance sheet so much easier, if you make a mistake you can simply alter it with one click.

Another huge bonus to working on your balance sheet or cash flow statement is that it is almost completely free of human error due to the fact that all calculations are done by the computer. The calculations your computer can do and do within a second or two would have even the most proficient accountant pouring over the books for hours. The IT of today can do wonders for your business however small your business might be. Of course there is no suggestion that to avoid insolvency you should give your accountant the push and turn to using your computer and Excel yourself. However if you do take the time to get to know how to work these programs you can look at your spreadsheet and cash flow yourself find out what state your business is in, whether this is good or bad.