How to Stop Being Surprised by Cashflow Problems

Introduction
It’s the worst feeling: sales are strong, but somehow there’s “no money in the bank.” Many owners are blindsided by cashflow, but it doesn’t have to be that way.

Why Cash Surprises Happen

• Focus on profit, not cash: There is no point in only looking at the profit number when you’re not managing cash as well. Things like finance/ debt payments, dividends and other ‘balance sheet/ cash only’ items, if not managed, can absolutely kill a healthy business.
• Lumpy customer payments vs. steady outgoings: You might be making profit, but if your cash collection procedures are not well implemented, you can run into trouble really quickly!
• No rolling cashflow forecast: Just looking at next week is fine, for next week, but if you have big outgoings coming up or surprises that you haven’t put a contingency in place for, you may find yourself in a whole world of hurt down the line.

How to Regain Control

1. 12-week rolling cashflow: short enough to see bumps, long enough to plan. We actually do a 12 month rolling for our clients, but 12 weeks will get your started.
2. Customer payment discipline: get in place clear terms with your clients, and ensure overdue payments are chased promptly. You need good credit control procedures and they then need to be policed correctly.
3. Visibility of upcoming tax/VAT: build them into your forecasts early so there are no surprises. They don’t always have to be accurate, but a conservative number is better than no number. A lot of our clients have VAT payments well north of £100k per quarter so these need to be closely watched.
4. Scenario planning: As yourself “what if sales dip by 20%?” What is costs increase by 5%?”. Plan for all eventualities so that nothing can hurt your business.

Conclusion
Cashflow shouldn’t be a guessing game. With the right systems, you’ll sleep better and avoid last-minute scrambles with the bank. If you need any help, book a call below and we’ll get everything under control.