We know what is happening with our banking system and businesses both in the UK and abroad are having difficulties getting finance, and the bank is one of the main areas where we discuss our business cash flow issues. We do talk to our accountants, who should be more supportive and productive, I have found to be the opposite in many ways, I am not saying all accountants but there are a fair few that will only do the basics.i.e. VAT Returns, End of Year Accounts and possibly a bit of bookkeeping – they appear to be more interested in the historical data rather than looking to support a company’s future growth
So who else do you turn too, Brokers, Consultants… ?
You need to discuss cash flow issues with experts, specialists in the field of Credit Management, after-all that is their core expertise. What businesses need, is sound guidance and a bit of hand holding when it comes to Cash Management, and accept that as business owners they cannot be expected to know everything. There are huge savings to be made internally, and this is where a business should be looking before they request financial support.
This is a serious flaw, and that is why so many companies fail, because they bury their heads in the sand or they leave this issue far too late and then expect someone to bail them out.
When I was working as a Group Credit Manager, I saw my role as Profit Manager, making sure the department worked to the agreed agenda, whilst looking at ways to save the company’s hard earned cash.
Cash Management is the core of a business, treat it with respect and it will pay you back ten fold. With that in mind, let’s take a look at Cash Management in greater detail.
Cash flow management is vital to the health of your business. The oft-used saying, ‘Revenue is vanity, profit is sanity; but cash is king`, remains sage advice for anyone managing company finances. To put it another way, most businesses can survive several periods of making a loss, but they can only run out of cash once.
The importance of cash flow is particularly pertinent at times when access to cash is difficult and expensive. A downturn creates extreme forms of both of these problems. When the `real economy’ slips into recession, businesses face the additional risk of customers running into financial difficulty and becoming unable to pay invoices – which, allied to a scarcity of cash from non-operational sources such as bank loans, can push a company over the edge. Even during buoyant economic conditions, cash flow management is an important discipline. Failure to monitor credit, assess working capital – the cash tied up in inventory and monies owed – or ensure cash is available for investment can hamper a company’s competitiveness or cause it to overtrade.
Cash flow is the life blood of all businesses and is the primary indicator of business health. It is generally acknowledged as the single most pressing concern of most small and medium-sized enterprises (SMEs), although even finance directors of the largest organisations emphasise the importance of cash. In this current economic climate, where access to liquidity is restricted, cash management becomes critical to survival.