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How To Manage Cashflow

By Expert Author: Leslie Tejadad

KSA Associates are one of the leading management accounts firms in Birmingham and as such we want our clients to have a good understanding of cash flow management. Cash flow is a critical part of any business and the ability to predict and manage cash flow is one that is overlooked by all too many business owners, often leading to bad consequences for the business. Cash Flow Management for businesses in Birmingham can be made easy by utilizing KSA Associates Financial Director Package, but we always advise our clients to learn as much as they can about the importance of cash flow and how to predict it.

To that end we have compiled a checklist of things that any business owner can do to help monitor cash flow, and therefore, the health of the business. Having a profit and loss account is part and parcel of running a business, but too many people rely on this to show them whether the company is healthy or not. Profit and loss won’t show fixed asset purchases or loan repayments but each will have an impact of the available cash in a bank account. Linking the balance sheet to the profit and loss account is required to give an accurate picture of where the business is. Likewise, concentrating only on the bank balance is likely to give a skewed version of the actual state of a business’s finances.

Preparing a cash flow projection can seem like a lot of work for an already overworked business owner, but it is something that will pay dividends in times to come and actually save time and money. Knowing that there is money in the bank to pay the bills makes life less stressful and knowing that there are big bills coming and not much cash means that the business owner can concentrate on chasing up those outstanding invoices. If you consistently pay your suppliers when you say you will instead of fobbing them off and making late payments then you will build up a good relationship and if times do get tough they are more likely to give you leeway. Cash flow management for the businesses of Birmingham is crucial then.

Preparing a cash flow projection is not as tricky as it seems. If the business is already experiencing cash flow problems then a short term projection will be more useful. Ensuring suppliers are paid is more important than overall profitability when times are tough. Make the projection as detailed as possible and include all outgoings no matter what they are. Any loan repayments including interest, wages, ink for the printer and even milk and tea for office staff should be recorded. All incoming should also be included in the spread sheet as well as the bank balance at the start of the period of cash flow projection. It is useful to separate all incoming payments rather than lumping them together to give more of an idea of where each payment is coming from and when it is due.

If you’re still unsure of how to make a start with predicting your business’s future cash flow then we at KSA Associates will be happy to advise and help you. As a leading management accounts firm in Birmingham we want our clients to succeed and we are committed to helping them grow successful and dynamic businesses as part of Birmingham’s vibrant economy.

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