At McDade Roberts we are often reminded that in business, cash can be king. To help you keep an eye on your cashflow, take our quick quiz to see where your business could improve.
Why Is Cashflow Important?
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 Cashflow Projection
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
- 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 too. 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.
Quick Cashflow Quiz
20 signs that your business could be facing cashflow problems
To help you focus on your cashflow and profitability we have prepared a quick checklist quiz. Simply answer 'yes' or 'no' to say whether each statement is true for your business. If you have more 'no' answers than you are comfortable with, you may be facing cashflow problems. Call us at McDade Roberts to discuss an action plan.
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Yes
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No
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When we receive a job, we know we can complete it and be paid on our terms
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We send a bill as soon as we complete a job
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Invoicing documents are accurate, complete and clear
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Our credit procedures alert us to problem customers so that we can follow up on outstanding accounts
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We monitor and enforce our credit terms and obtain deposits from 'doubtful' payers
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We finance capital expenditure in the most cost-effective manner
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Our pricing reflects time spent on jobs and covers associated risks
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Employees understand the importance of the business's cashflow
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We complete work efficiently
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We catch mistakes before they reach customers
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Mistakes cause us to improve processes
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We keep a close eye on budgets throughout the year
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We determine the viability of outsourcing work
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Adequate controls are in place to control employee overtime
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We are effective in negotiating materials and supplies contracts
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We forecast cashflow monthly and base our financial arrangements on our projections
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Our bank is our partner and understands our business and its financial needs
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We always see that work is done by the least expensive, capable employee
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We link staff pay to productivity and company profits
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Our standard operating procedures are written down and everyone follows them
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So how many no answers have you got? If this checklist made you realise that you need to focus more on cashflow, why not give us a call. We have years of experience helping businesses like yours with all aspects of accounting and a fresh pair of eyes on cashflow can be a very valuable tool to help you manage your business more effectively. Call McDade Roberts Accountants in Preston, Bamber Bridge and Longridge today. The first consultation is always free so you have nothing to lose.