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Cash Flow Management

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Cash Flow Management

It is money that runs your business. That old cliché, “cash is king” is the key to operating a successful business. How can you realistically operate your business without having the cash to pay for inventory, payroll, insurance, rent, utilities, and all those other things that you make payments for on a weekly basis?

Your financial statements tell you how your business has operated over the past month or year, but you can’t drive a car by looking in the rear-view mirror. You need to do some future planning to make sure that you have the resources that you need to “feed” your hungry business. You really need to look at your Cash, and how you will collect it and use it over the coming months.

The best planning tool is the Cash Flow Forecast. Just as your budget and income statement look at sales, cost of goods sold and operating expenses, the Cash Flow Forecast looks at money coming in and going out of your business over the next 13 weeks. For the layman, this is a complex set of spreadsheets, planning for every payment that you need to make and every check you’re going to receive. The greater the detail of the forecast, the more accurate it’s going to be. For the experienced CFO, a cash flow forecast is the bread and butter of financial planning for your company.

When you examine the cash impact of Payroll, for example, the important thing is what is coming out of your checkbook each time you run payroll. Every deduction, tax payment and fee needs to be added in. The same goes for any planned and potentially unplanned payments that you may have to make.

In looking at your cash receipts, it’s important to not look at the aging of your AR Invoices to determine when you’re getting the money. You need to look at when your customer is really going to pay you. You may give a customer net 30 day terms, but if they never pay you till the invoice is 45 or 60 days old, you can’t depend on that money till then.

The skilled executives at CFO Simplified are ready to work with you to assemble a Cash Flow Forecast that will make your daily planning less stressful, assuring that you have the cash you need, when you need it.

Cash Flow Improvement

The greatest concern of any business owner is having enough money to cover their bills and payroll. Those are basic to any business, and you will put together a plan so that the timing of your receipts and payments result in a positive cash flow. But, sometimes the numbers don’t work. Sometimes, you have expenses that you hadn’t planned on. Sometimes your customers weren’t as prompt in paying as you expected them to be. Sometimes they get caught by the cash flow crunch as well. When it comes right down to executing that plan, there may be things that you need to change, adjustments that you need to make to bring more available cash to your company.

This is where an experienced CFO can be a critical member of your team. The managing of cash is a balancing act that takes into account many factors. Some of them are the result of long-term planning decisions – leasing versus purchasing, monthly payments versus annual payments. Some of them are the result of short-term planning – granting discounts for early payment by your customers, taking discounts for early payment to your suppliers. Some are decisions that you make based on your current operations – deposits you require of your customers, or deposits your suppliers insist you have to pay. These can be tender and risky negotiations with people that are critical to your business.

The difficulty is assuring that you can balance that cash by pulling on the receivables side and pushing on the payables side without upsetting the confidence that your suppliers, customers and employees have in your ability to function. Let’s be clear, it isn’t easy. Your reputation is the most important thing that you have to sell, and negotiating at a time like this needs to be done by someone experienced, someone who has seen it all before, someone that isn’t personally involved. Someone who can balance your needs with the demands of your business.

The skilled executives at CFO Simplified are ready to work with you to improve your Cash Flow, making your daily planning less stressful, and assuring that you have the cash you need, when you need it to operate your business.

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