Nothing is certain in business or in life. Crisis or not, creating positive cash flow is essential for any enterprise and can be one of the toughest hurdles to get over. Many SMBs struggle to survive due to lack of cash flow understanding – which is often caused by the following pain points:
- Not enough visibility over expenses
- Don’t have the right financial tools to tackle data
- Limited view of financial health
- Not enough cash flow throughout the year for a rainy day
- Put it all in one digital place
- Start building a cloud accounting app stack, use software that integrates with chosen general ledger
- Run more profit and loss reports using real-time financial data
- Use a cash flow statement and forecasting system to determine position now and in the future
Beyond on the solutions above, here are three ways to help businesses understand their cash flow and give them deeper financial advice:
1. Position yourself as an in-house CFO
- Show specific value, tailored to your client
- Start small with diagnostics
- Bridge the initial conversation as their in-house CFO
- Position solutions, not products
2. Utilise real-time information
- Add data strength to your strategy
- Shows the immediate benefit in terms of savings or financial risk
- Strengthens the positive impact of forecasts and goals
- Real-time data is accurate, and accuracy drives sharper strategies
3. Produce reports specific to client goals
- Create cash flow forecasts
- Produce quarterly report packs and have follow-up meetings to discuss and re-forecast
- Monthly management reporting on benchmarking and business resilience planning
Achieving healthy cash flow
Phool Ashraf, Co-Founder of Gains Accountants, works with the goal of helping the hospitality industry manage and maintain healthy financial environments. For Phool, better cash management starts with getting cash flow right.
“Cash is vital for the survival of any business and something to which the vast majority of restaurant owners do not give adequate attention. Seasonal sales trends put strains on cash flow, leaving restaurant owners concerned about paying their staff and regular liabilities.
Lack of effective cash flow management can cause the business serious risk and can ratchet up pressures for dealing with supplier payments, staff wages and tax bills in a timely manner.
It can also have a detrimental effect on stock purchasing power, causing stock to be purchased at higher prices and reducing the owner’s access to cash. Cash flow management goes beyond cash flow forecasting.
It involves understanding the underlying cash inflow and outflow figures, expenditure requirements, any cash shortfall, developing a cash flow model and the avoidance of overspending. It actively promotes optimum employment of available cash within the business.”