If your business needs a cashflow model then take two minutes to see how we go about building a simple, useful model and keep it going for as long as it’s helpful.
Press play and also use pause as there’s a lot to take in on some of the pages.
Keep your cashflow model up to date
As you can see in the video, getting your bookkeeping up to date is an essential building block as is keeping it up to date.
At the start of the new month we update the cashflow model for the receipts and payments that occurred last month and make sure the closing balance in the cashflow model agrees to the reconciled bank balance(s) in the accounting software.
Then we discuss with the client what is likely to happen over the next three or four months.
The primary focus is on sales and payments by debtors. Then we look at the outgoings.
Only then can we see if there will be any problems to navigate, quarterly pinch points, and we can put solutions in place.
Forewarned is forearmed!
Pro tip: we rarely look beyond the next three or four months in the forecast. The sunlit uplands of a year down the line can take care of themselves but you won’t reach them if you can’t navigate the next three or four months.
How a cashflow model improves cashflow
Firstly, if you can measure something then you can improve it. So, simply having a cashflow model at all will focus attention on cashflow issues and how to solve them.
The areas to look at for improvement are typically:
- Profitability – making more money from every sale will improve cashflow
- Credit control – improve your debt collection so you receive payments from debtors sooner and stop selling on credit to poor payers
- Have one creditors payment run a month – this helps you to set a target for sales and debt collection. Also, your suppliers will get used to a reliable pattern of payments from you which will be very helpful
- Agree phased payment terms with suppliers if you need to and make sure you stick to them
- Cut costs to save money and conserve cash
All these measures can improve cashflow and you can see the effect of them very quickly.
Practice makes perfect. At the time of writing this blog, Molly’s cashflow model has been running for nine months.
The financial management of her business has improved beyond recognition and Molly has become very sure-footed at forecasting, managing and improving her cashflow and her profitability.
History can repeat itself. As time goes by you build up a month by month cashflow history which becomes ever more useful and is a great reference point, particularly for a seasonal business.
How can Blue Dot Consulting help with your cashflow?
Quite simply, we know what to do and we can work with you to get your cashflow model in place very quickly, as well as bringing your bookkeeping up to the standard your business needs.
No bells, no whistles, no fancy graphs or apps – just a cashflow model that works for you.
Let’s have a free-of-charge chat about your business – call Michael Austin on 020 7125 0270 or email info@bluedotconsulting.co.uk
Michael
Related links:
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