Page 63 - Paulisms: Gold Nuggets for Small Business

At the end of the month, it is also very important to know your stock situation – how much stock you have at the beginning of the month and the end of the month (it affects your profitability). If it goes down $10,000 in one month, you may have lost $10,000, so it needs to be factored into your profitability.
Without going into the accounting maths, you need to know:
stock at the beginning and end of the month (all stock in the warehouse/van or that you have been invoiced out and therefore need to progress claim)
debtors (money owed to you)
creditors (money you owe)
money in the bank account.
These may appear to be basic things, but many people don’t know their situation at the end of the month and therefore can’t make sound business decisions. Often they think things are rosy only to find out when the final accounts come out that they are in trouble.
3.1.2 Stock
If you have stock, try to hold off ordering more until the first day of the new month, as it gives you up to seven weeks’ credit. I am surprised at how many people place big orders on the last day of the month. It makes the suppliers put on a big smile with a big, juicy order to bump up their sales, and, more importantly, their net profit, as overheads are covered. The purchaser gets their stock, but now only has three weeks or less credit as opposed to seven. This is very significant on cash flow.
3.1.3 GST