I’m blogging for the first time as my alter business ego Mr Business (I’m not Joe Sugg) but I do have more than 30 years’ experience as both a Corporate Bank Manager (I know!!!), and more recently working for 6 years on my own as a Non Executive Director/Business Advisor. I have worked across a range of businesses and sectors, from start-ups, SMEs (Small and Medium Sized Enterprises) as well as larger Corporate entities.  My passion is to share the best practice that I have learned working with and within businesses. I want to avoid being overly technical (I’m not an accountant), providing practical and interactive advice – I look forward to answering your questions and inspire positive discussions as well as blogging on key/relevant business areas. I genuinely hope that these fortnightly business blogs on financial and funding matters will strike a chord with you and help you look at how you monitor your business’s performance, too many businesses fail not because they are profitable but because they run out of Cash.

This is often considered mundane stuff; but it is just as important to your business as your sales, products and your clients. To kick off the first blog there’s one thing that’s always been true it’s that there’s nothing more important to a business than CASH.

‘’CASH IS KING’’ – it really is – it’s not just a saying

Remember the old adage that “Turnover is Vanity, Profit is Sanity, and Cashflow is Reality”…. a failure to regularly challenge your business ‘do I have enough Cash’ can so often be the difference between business success and failure. Profit does not equate to Cash. Cash gets locked up in so many areas for a business and can leak out of the business in numerous areas.

As detailed the sad reality is that profitable businesses do regularly fail.  For many small businesses, good Cashflow management can be a constant worry. Juggling payments, invoicing and managing stock can prove to be a headache and even a healthy profit and loss can be undermined by negative Cash. But how do you know that you have negative Cashflow – the truest barometer of Cash will be your Bank Account extremes – ie have a look back over the last 12months and plot the month-end balance of your Bank account on a graph to understand your Cash trend

Reflecting the importance of Cash within your Business

As business owners, you can regularly find yourself time-poor – working across multiple areas of the business, often with minimal levels of support. In many cases, it’s financial, funding and importantly Cash planning that can get put on the back burner (a ‘Friday afternoon task’) in favour of things often considered to be more critical to the day-to-day operation of the business. A good first step is to move Cash up as a real priority.

Cash Forecasting

Without a Cash Forecast, you could find yourself stumbling around in the dark making uninformed CASH decisions. It’s important to anticipate and understand the risks to your Cashflow so that key business decisions can be taken in consideration of the Cash impact. Business owners are by their very nature optimistic – this is critical and sets you apart – but it must be combined with the discipline of understanding how events/actions could impact the running of the business and your Cash. Accounting software advancements, SAGE, Xero, Quickbooks etc means that you are now able to see your financial data in real time which should enable most businesses to prepare a Weekly CASHflow – looking ahead the next 12 weeks as a minimum, a real must. What could be preventing you from completing even a basic CASH Forecast? It could be, Time, Knowledge both can be overcome when the benefits and improved Cash visibility ensure a better night’s sleep!!!

cash forecasting must be accurate, it is an easy mistake to forget about significant outlays that are paid at irregular intervals. This could be VAT, which is usually paid once a quarter, or corporation tax, which is paid nine months after the year-end. While things may look healthy from a CASH flow perspective, it could be that significant tax liabilities have been forgotten about. Test your Actual Bank Acc Balance to your Forecast how close are you !!!

Addressing possible Cash pressures at an early stage, whether it’s securing an overdraft with your bank or other working capital solutions (there are many to be considered) a payment extension with a supplier etc, acknowledging an issue early on can significantly improve you Cash options

Next time I will review practical monitoring tools to help you improve Cash analysis and collection

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