We have had many clients who are subject to regulatory compliances and often say that we do have a healthy bank balance, so everything is fine with our business.

This could be true in some cases, but in a vast majority of cases, having a healthy bank balance does not necessarily mean you have made a healthy profit or you have those balances available as surplus.

Some of the instances where you may think you have a good bank balance, but not necessarily arising on account of profits include:

• Delaying the payments to your creditors / suppliers – when you delay your creditors, funds to that extent of payables continue to remain in your accounts – but they are not yours.
• Advances collected from your debtors or clients / consumers – where you have collected advance receipts, either in the form of upfront payments for the next 3 months / before supply of products. These are funds collected in your account however you must remember, till such time their service is not delivered or product supplied – these are not really your funds.
• Loans availed either on personal front or corporate and then deposited in your business account. While the funds are technically yours, you have however a liability or repayment attached to the funds in the bank. This will no doubt contribute to higher cash availability to you but then again, these funds are not yours.
• Capital contributed by shareholders, while these are definitely free funds and are yours, they are not the funds which have been generated out of profits.

How to optimize the funds you have with you and how much is your business yielding you and also are you optimizing your funds to the maximum to enable higher profits? To understand your finances better, would suggest you contact us.