Managing your cashflow
This Managing your cashflow Info Guide suggests actions you can take and tools you can use to improve your cashflow.
The timing of cashflows is affected by:
- seasonality.
- overtime payments.
- required refurbishments and improvements.
- supplier terms.
- tax and bank repayments.
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A Cashflow Forecast is a tool which you can use to estimate the amounts of cash coming into your business and the amounts of cash going out for the forthcoming three-month period or for the forthcoming year. This will help you to spot potential cashflow shortfalls in advance and take corrective action.
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Things often take twice as long and cost twice as much as you anticipate.
Remember!
Build in an amount for contingencies to give you a margin of safety.
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Once you have prepared a flexible Cashflow Forecast and have identified times when you may have cash shortfalls, you should speak to the relevant people, for example, your bank manager, as early as possible.
Example
- Organise a bank overdraft needed for later in the year well in advance before it becomes an issue.
- If you have difficulty meeting a forthcoming lease or mortgage payment, be open and honest with your landlord or bank manager in good time – this may help you avoid serious problems.
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Put controls in place to protect cash takings and to prevent customers from leaving without paying.
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Keeping on top of your cashflow position requires ongoing monitoring from you or your book-keeper. Your Cashflow Forecast should be a living tool that is rolled on from one week or month to the next with actual information providing the new starting point to project forward.
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