“Never take your eyes off cash flow because it’s the life-blood of business” (Richard Branson)
The Companies Act is underpinned by the assumption of liquidity and solvency – directors and owners are mandated to ensure the business can meet all its short term obligations.
The best way to achieve this is via cash flow.
As cash flow is fundamental to any business, this should be managed by senior management.
Sit with your accountant and work out the monthly inflows and outflows from your bank statements. Put them into a spreadsheet and then review this frequently (weekly is desirable) until the cash flows start to get accurate. More importantly you begin to understand the patterns of your company’s cash flows.
The most significant aspects of cash flow are:
Ultimately, no business will flourish without growing sales. Also key to sales is managing debtors:
When you review your business after each month end, build in cash flow to the review. Many businesses now have free cash flow as a key performance indicator.
Cash flow is critical to any business – give it the attention it deserves. It will also give you a good understanding of how the business is performing.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.