Cashflow is king

By Kevin Ward, Conatus Financing Solutions Through our work helping businesses grow or assisting them when they’re distressed, we have often encountered situations where the senior management has failed to monitor and consider the business cashflow and financial performance adequately.

Published in Suffolk and Norfolk Director Magazine, Spring/Winter 2020

We know that finance isn’t something everyone is comfortable with. It’s easy to fall into a trap of just looking at a draft profit and loss report, that hasn’t been reconciled or closed for month-end and feeling happy that there is a positive figure at the bottom. But you may potentially be unaware of brewing issues or that it could be incorrect. This has been a regular problem for us over the years and has led to many companies finding they’re in a different place to where they thought, long after matters have deteriorated, and in some cases, when it’s too late to help them.

That is why we have set up a bookkeeping team to allow companies to outsource their internal finance needs. We don’t do annual accounts or tax advice, but the key bit we do is to produce quality and relevant management information and rolling cashflow forecasts.

That’s because we believe it’s a responsibility of the business owner to have certainty around what is happening within their company. It also ensures we have quality information and know exactly how things are going within our client’s business.

Every business is unique, but a commonality will be that a business owner has key performance indicators (KPIs) that highlight business performance. These KPIs could be anything from volume of a raw material bought to sales of a product or service.

With bespoke reporting for the business, we believe the owner or management team should be able to have a one-page report that is simple and straightforward and allows them to understand exactly how their business is performing. Financial certainty is vital, so making it uncomplicated encourages people to want the data and in turn to use it. The information may come from various accounting systems, but the key is to have a report that enables quick decisions to be made and identifies areas that need more scrutiny.

Profitable businesses can go bust and cash flow is a core part of the financial certainty a business needs. Therefore, someone in the senior management team should have a responsibility to monitor that cash flow closely. A rolling 90-day forecast is usually the best solution as it will allow the directors to look out for their creditors’ interests and spot when they’re likely to have problems.

Also, don’t hide from reality or shy away from areas you’re not fully conversant with. Seek help from people who can simplify your financial information and focus on the key elements. If a problem or issue is found, liaise with the professionals you work with, engage with your bookkeeping firm, your accountants, and don’t be afraid to speak to a good quality insolvency practitioner. In our experience they’re excellent at helping people avoid the need to engage them for their insolvency services!

Kevin Ward is director and co-owner of Conatus Financing Solutions and an Associate Member of R3, The Association of Business Turnaround Professionals. Contact Kevin on or visit Twitter: @ConatusA

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