Maintaining a Healthy Cashflow

This is the third in a series of articles on Cashflow. You can read the previous articles here, and here.

There are a number of things financial experts say you can do to ensure your cash flow remains healthy and stress free. These can include:

  • Ensuring you have an accurate profit and loss balance sheet.
  • Ensuring your monthly financial statements are reviewed at least two weeks before the end of the month.
  • Compare how your actual cash results compares to your budgeted results. Is there a big gap? You must ask yourself why this is and what factors have come into play. Have you overspent? When/where did this occur?
  • Prepare a bullet point list of what went well during the month and what areas need improvement.
  • Update your budgets for future quarters in advance so you have a clear position of where you are going.
  • Prepare a report each month that shows key performance indicators (KPIs) and monitor it regularly.
  • Quiz your business; preparing a relevance test will help you in figuring out areas of improvement are needed in the business and what measures can be put in place to fix this.
  • Ensuring all department heads work together and know what is going in and out of each department. Developing a departmental profit and sales report will help you pinpoint the source of the business’ profits along with which departments are dragging.
  • Examine external factors that may influence the business’ cash position. For example: interest rate movements, average debtor days, material and labour cost movements, exchange rates etc.
  • Monitor your main ‘cash competitors’ – e.g. stock and debtors.
  • Get to know your customers. Conversation rates are slipping and therefore it is vital to understand what motivates your customers and what influences their buying decisions. Email just isn’t cutting it where this is concerned.
  • Keep your business offer innovative and fresh.

Cash flow is the lifeblood of your business. If you see it in distress, it’s time to take action. You must always be prepared for the bumps.

Do you use management accounts?  The most successful businesses do?  If you need help in preparing the statements mentioned in this article contact us we will be pleased to help you with a no cost initial consultation.

Look out for more articles on this subject.