Cash Flow Planning 

Although profits from a business venture are a measure of success, the flow of cash in and out of a business can be said to be its’ lifeblood. Cash flow planning is critical to the survival and growth of a business. Unless cash is available at the time it is required, the business may have to close its doors, even though profits are being earned. 

Are you able to tell me what your cashflow position will be in 6 months time?

The first thing a cashflow provides you with is an overview of what your cashflow needs will be on a month to month basis and a picture of where you will be in 12 months.  

If you forecast your business’s income and expenditure and you don’t like what you are seeing, you can act before you get in too deep.  

A cash flow budget, when used properly, is a vital management tool as it will highlight potential cash flow problems in advance and allow you time to prevent the problem or minimise its’ impact.    It improves communication with key staff and other stakeholders such as your accountant and the bank as you have  a clear insight on the business performance in comparison to expectation.  It can highlight areas of concern in debt collection, stock control or rising costs of inputs which had previously gone unnoticed and can offer opportunities to change business practices to address these areas and smooth the flow of cash throughout the year

Secondly, you can use your projections to work out ‘what if’s?’.  What would be the impact if you put on that additional sales person.  What would happen if you moved some roles overseas?  Can you afford to invest in more equipment?  You can see the affect of your decisions before you make them.

Simple changes can make big impacts

Simple changes to business policies and procedures can have significant positive impacts on your cash flow .  Detailed debtor processes ensure that debts are collected on time and in an effective manner.  Offering discounts for up front payment allows the business to use cash on hand to reduce interest payments by maintaining cash levels in loan offset accounts and effective  use of credit cards can allow the business owner up to 55 days additional days to make payment on Creditor accounts. If you're looking for a guide, you can click here to download our "10 Steps to Improving Your Cash Flow" guide. 
We are experts in cashflow forecasting.  If you want to plan better for your business or need help to get your cash flow planning under control, call PJT Accountants & Business Advisors and talk to one of our team today.