We really did have to run a daily cashflow forecast for a business.
The business was in its infancy, maybe a couple of years old. It’s main expenses were people and premises and its revenue came from the delivery of consultancy projects.
The costs were pretty consistent but the projects were lumpy, some didn’t finish when they should and some of the clients took their own sweet time over payment of invoices.
There was an overdraft facility and it was well-used.
And it was about to be breached!
The daily cashflow forecast
So we built a simple Excel cashflow forecast in which each column was a day. We only needed it to run for two months in to the future.
Some outgoings we knew would happen on specific days – paying the staff, the PAYE/NI payment, lease direct debits and rent.
Some outgoings we had greater control over – such as paying the overhead suppliers (including the very helpful accountants!)
And the “known unknown” was when clients would pay their invoices.
We knew when they should pay and we could see what the cashflow would like if the money came in when we expected it.
And we could see what the cashflow would look like if the money came in late – the day when the overdraft limit would be exceeded and by how much.
And we could see when the bank balance should come back to be within the overdraft limit.
The right tools for the job
It turned out OK.
We kept in touch with the bank (in those days banks had people you could talk to), current projects were completed and new projects were won.
The business emerged fighting-fit for the future.
But it could have been very different if the daily cashflow forecast wasn’t there to help navigate the business through a period of turbulence to a safe harbour.
The daily cashflow forecast episode was well over a decade ago. The business survived, flourished and is now a multi-million turnover, international management consultancy.
We do like a happy ending!
And if it happened again today?
In today’s landscape we have plenty of apps but fewer bank managers.
But in similar circumstances I’d do the same again – build a simple daily cashflow forecast using Excel.
And keep it running until the danger has passed.
Cashflow an issue? Call Michael Austin on 020 7125 0270 or email info@bluedotconsulting.co.uk and let’s have a free-of-charge chat about your business.
Michael – @bluedotmichael
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