Cashflow Management

Keeping an Eye on Your Cash flow

Cash is the lifeblood of a business, but with so much emphasis usually put on profitability, it can be easy to overlook this fact. Of course, the bottom line is important, but poor cash flow management can drive a growing and/or profitable company out of business.

The risk is especially great for expanding companies. For example, if billing is delayed at the same time as stock is accumulated to fulfil increased orders, you can find yourself short of the cash needed to pay suppliers and employees.

The benefits of projections

Cash flow projections are critical, especially in times of need, but you don’t have to wait for a crisis to benefit from good cash flow planning. A properly developed cash flow projection can help a business foresee and prepare for potential shortages. Cash flow management can also help you:

  • Maintain adequate cash reserves to pay bills, expand the business and invest in facilities and product development
  • Reduce interest costs through managed borrowing
  • Increase interest income by transferring surplus funds into interest-bearing accounts temporarily, if appropriate
  • Receive discounts through bulk purchasing
  • Improve relations with the bank manager

Businesses that prepare cash flow projections often learn something about their systems, the dynamics of their business, and the process often has other positive outcomes. For example, you might discover that you need to pay more attention to certain customers, or that you can defer payments to suppliers more beneficially.

For more information please contact Iain Sim or Gill Groom.


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