Recession Proofing Series – Cashflow

 

Cash is the life-blood of a business.

Businesses can be extremely profitable and still fail as a result of running out of cash.

We want to help you to better manage your cashflow.

We ran a series over Summer 2022 on the “Causes of Poor Cashflow” – here’s a recap with the links to the articles:

1^st Cause – Cash Lockup

2^nd Cause – Your Accounts Payable

3^rd Cause – Your Stock Turn

4^th Cause – Your Debt or Capital Structure

5^th Cause – Gross Profit Margins Are Too Low

6^th Cause – Overheads Are Too High

7^th Cause – Sales Are Too Low

Cashflow Forecasting

If you only prepare a Cashflow Forecast because the bank has requested one, it’s time to frame your thinking.

Cashflow Forecasting doesn’t have to be complicated or time-consuming to keep on top of.

We wouldn’t advocate using something that we don’t use every day ourselves, so here is the template which we use for our business.

The template is set up to run on a weekly basis.  You can add the certainties into the spreadsheet (bills that come out regularly, or sales that are consistent say on a monthly basis).  From there you can add estimates for future sales and purchases.

The graph tab then gives you an overview of the weekly cash flow over the next 12 months.

We use this for short-term planning but also long-range planning to make informed decisions as to whether the business can afford an increase in overhead, a new member of the team, the impact of a new client etc.

Click here for a quick video on how to use the template.

 

Cashflow & Profit Improvement Meeting

To help further, we would like to make you aware of our Cashflow & Profit Improvement service.

The first step is to determine your business’ Cash Conversion Cycle.

This tells you how long your cash is tied up in your inventory, debtors, and payables.

The longer your Cash Conversion Cycle, the less money you have available in your bank account.

We’ll then help you identify 1-2 strategies you can implement to shorten your cycle so you have more cash in your bank.

Of course, profit matters too, and increasing your profit can increase your cash flow.

By implementing strategies to improve both your cash flow and your profit, you can set your business up for success.

If you’re unsure of the difference between cash flow and profit and often wonder why there’s not as much money in your bank account as you expected, this meeting should be a priority.

 

During the Cashflow & Profit Improvement Meeting, we’ll:

• Calculate your Cash Conversion Cycle
• Determine strategies you can implement to improve your cash flow and profit
• Use our calculators to demonstrate the impact these strategies can have on your cash position and profit
• Identify actions you should take to implement these strategies and achieve your improvement targets

The sooner you attend a Cashflow & Profit Improvement Meeting, the sooner you can start increasing your profit and cash flow and increase the money in your bank account.

 

By attending a Cashflow & Profit Improvement Meeting, you’ll:

• Understand the difference between cash flow and profit
• Identify the key cashflow drivers and the Cash Conversion Cycle in your business
• Learn how to improve your debtor days, inventory days, and payable days
• Discover the impact small changes can have on your profit and cash flow

 

If you’d like any help with the cash flow template, or would like more information on the Cashflow & Profit Improvement Service, please email us or get in touch.