If there is ever a time you should be regularly focusing on your cash position, that time is right now!

The way to do that is with a cashflow forecast. This will help you maintain visibility of your cashflow, bolster your cash confidence and ensure the stability of your business.

Cashflow (not cash) is king. This means it’s not about how much cash you have in the bank today, or tomorrow. It’s about when cash is arriving in your account, when cash is departing from your account, and whether the cash remaining is a positive or a negative number.

This is what a cashflow forecast will achieve and, when you have visibility of this, you’re able to anticipate potential cash shortages (or surpluses) before they occur and be able to plan for these.

Here are five key strategies to help you get cash confidence

  1. Focus on your debtors
  2. Negotiate new or temporary terms with your suppliers
  3. Communicate with stakeholders
  4. Review your costs
  5. Seek Financing

1. Focus on your debtors
This is about accelerating cash inflows such as customers who owe you money. You may find that your customers are also watching their cashflows and unless you make some noise, you might be at the bottom of their list.

Try to avoid offering discounts for early payment or incentivising customers to make prompt payment. If you’ve done the work and done it well, your customers need to pay what they owe.

2. Negotiate new or temporary terms with your suppliers
This is about prioritising payments. Identifying essential expenses and prioritising them to ensure critical operations continue. Pay your employees, suppliers and essential bills to maintain key relationships and avoid disruptions.

3. Communicate with stakeholders
Keep open lines of communication with suppliers, creditors, and lenders. Explain your situation and explore potential arrangements, such as payment plans or temporary concessions, to alleviate immediate cash flow challenges.

4. Review your costs
We believe there are two types of ‘costs’. The obvious and the hidden.

The obvious are staring you in the face on your Profit and Loss. They’re things like discretionary spending, supplier costs (finding a cheaper supplier), marketing costs, staff / wages costs.

The hidden are not so easy to spot. They are a result of the key levers in your business that are the difference between making money or losing money.

Some examples of hidden costs were covered in Part 1 of this blog series and include:

  • Exiting unprofitable customers – these are customers that you spend hours and hours on that you cannot on-charge (complaints, re-work, mistakes, out of scope work)
  • Productivity of your team – this covers both the hours that your team are paid vs hours that are actually invoiced to your customers; as well as the operational efficiency of your business, the latter of which can take some time to reap the benefits of improvements.

Don’t forget about the cost of taxes also that don’t appear on your Profit and Loss. And make sure you have a plan well in advance for paying those as they fall due.

5. Seek Financing
As a last resort consider short-term financing options like lines of credit, small business loans, or factoring services to inject cash into your business. Research government assistance programs and grants that may provide additional funding.

If you think you might need to talk to a financing company, do this early on rather than waiting until the wheels are falling off. Banks and lenders don’t like surprises and you’ll likely get a more favourable outcome by approaching them early.

These concepts are not easy to put into practice.  But we can help.

If you’re keen to sure up your revenue please come and talk to Pathfinder Solutions about how we can work together towards your even more successful business future.

Check out our other blogs in this series.

Margin trumps marketing – before you bring on more work, make sure the work you already have is at an industry standard margin. If the work you’re already doing isnt making you enough money, the problem is unlikely to be marketing but rather it could be margin.

Focus on the future – now is the time when businesses need to ask themselves where their future lies and how they’re going to get there. Businesses who regularly do business planning and set and focus on goals will achieve those goals with intent, instead of missing the mark year after year.

About Pathfinder Solutions

Pathfinder Solutions advisory team members have either owned or managed businesses, or are investors themselves, so we know first-hand the challenges you face in your world.

Sure we’re Accountants, but the best solutions in business come from focusing on more than just the numbers. Our real-world business experience delivers just that.

Get in touch – we’d love to help

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