Cash is King - how to manage potential risks and surprises.


Cash is king is a phrase that most business owners will have heard of.  The recent demise of Carillion highlights this on several levels – primarily for them as a company as the executive team were unable to secure additional financial support, but more importantly for the many suppliers who will now be feeling the pain and who in turn, could become insolvent.

One of the key challenges as a business owner is dealing with surprises.   

Chris Langrick says: "We believe that one of the key tools to help manage risks and potential surprises is by maintaining a rolling 13 week cash flow forecast (linked to a profit and loss account and balance sheet), with a financial dashboard, circulated to the key decision makers on a weekly basis.  Your dashboard should provide you with a debtors summary (and understanding whether your debtors are increasing or decreasing), highlighting any specific risks or concerns."

A well-managed business would be able to reflect those risks into their cash flow projection in order to get a good understanding of the financial impact on the business should that risk come to fruition.  This could highlight the need for a key decision maker within the business to contact a customer with a significant outstanding debt to help chase payment or trigger a need to arrange further funding. 

Chris continues: "One thing banks and funders do not like are last minute surprises, but most funders fully appreciate that things do not always go to plan, having control of a situation will provide them with a lot more comfort."

Should you need any assistance with cash flow forecasting and creating dashboard or require assistance with arranging funding, please do not hesitate to contact us.

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