Cash Management & Forecasting

Having a brand to be proud of, stellar products and offerings and an enthusiastic customer base can get you a long way in business. However, if you're working incredibly hard and feel like everything else is taking care of itself, your venture can still stall if company capital isn't progressing like it should.

To that end, cash will always be king.

In basic terms, any company looking to improve its financial position can break the exercise down into manageable chunks. Firstly, the process of collecting receivables from the applicable stakeholders and customers needs to be carried out in a timely manner.

Secondly, any payables should be slowed down or more spread out which can give the enterprise more room to breathe. Lastly, relationships with partners and suppliers can then be fortified in efforts to make the second step easier in the long-term.

While that may sound simple, many organisations will struggle to find the sweet spot of the process, and consequently see their cashflow falter or even regress.

A trap that many enterprises fall into revolves around being too caught up on what the company accounts look like on paper. Keep this in mind: without cash, profit is meaningless.

Ultimately, a business may appear profitable only to see its cashflow plateau. In this circumstance, the amount of money coming in may not match the amount going out which quickly leads to a financial imbalance.

If this isn't addressed, the enterprise may be unable to make the investments needed to boost its financial position, or will likely have to pay larger fees if they need to take out a considerable business loan.

Once the effects of bad cashflow take hold, they can be a huge factor in the survival of the business. This is compounded in small to medium enterprises in particular, with many potentially having to limit their output, or even face the prospect of closure, if financial management isn't taken seriously.

So, as much of the above outlines, getting cashflow into a more positive position is key. A big part of improving it is centred on the money that is coming into the enterprise from customers - whether they be general consumers or business-to-business transactions.

Actively speeding up how fast any capital can be processed may seem difficult, but there are a few relatively simple steps that any organisation can take. For example, centralising business payments to one bank will make the processing of incoming finances quicker, as will offering discounts to customers who pay in a timely manner.

Furthermore, tightening your enterprise's credit requirements can help improve cashflow. At the start of any endeavour, it is occasionally necessary to extend lines of credit to customers to secure more business.

However, the mistake that many organisations make is not amending any of these rules over time. Consequently, assessing the risk behind this process and more stringently dealing with credit reports can prove fruitful, and ultimately set the company on the way to a more stable financial footing.

You may assume that the position your cashflow is in today will be the single biggest dictator of the direction of your business, but projections of where you'll be in the future can hold just as much weight.

Ideally, the two parameters the financial position of the enterprise is measured by should be where cashflow is currently, as well as where it will be in six months' time. If you're not tracking cashflow at least quarterly - or even monthly - then you're setting the organisation up for a fall.

Ultimately, improving cashflow should be kept in mind by all employees. Of course, those higher up will have it as a primary concern, but working the idea that positive financial management is a must into all levels of the enterprise can prove positive.

This can then be related to any projections. For example, if staff are more aware of where the company should be financially, it could have the ancillary benefit of motivating them as getting the company into a better position can become a target for them to hit.

The next steps

There are measures that businesses can take to get themselves on the path to a better cash position, but real benefits are more likely to be unlocked if expert advice and insights are taken on board.

At WMC Accounting, we can help you put measures in place to ensure your business financials are kept in check. Any organisation with poor cashflow will soon feel the strain, but we're here to help alleviate the pressure.

Priding ourselves on our approachability and in-depth industry knowledge, we can assist businesses looking to pro-actively see to any area of their accounts that have gone awry.

The three pillars of our make-up are expertise, teamwork and commitment. Could you benefit by injecting these three mantras into your business? Contact us today and take the first steps toward getting your enterprise into a better cash position.

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