Monitoring your Cash Flow

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There’s a very good reason why we made ‘Monitoring Your Cash Flow’ the first of our Rebound Resources! It’s absolutely paramount for any business coming out of the upheaval caused by the pandemic to be really aware of what their cash position looks like.

  • You may have been closed, with no sales, for weeks at a time, on several occasions.
  • You may have had overheads that you still needed to pay in that time, reducing any reserves to a minimal level.
  • You may well be coming out of the pandemic with borrowings, either as a Bounce Back loan scheme or a CBILS loan, that you hadn’t even contemplated before.
  • You may have had to refund deposits for events that couldn’t go ahead, or services you couldn’t supply during lockdown or due to staff shortages during the Omicron surge.

Any of these would put huge pressure on a business; any combination could be a dangerous one!

All of that said, if you have managed your cash carefully, with the injection of capital that may have come from the Government grants, the furlough scheme and any BBLS, CBILS or the Recovery Loan borrowings, you can start to look ahead and trade through.

To do so though, you MUST have good control of the business, and cash is key!

Cash is key!

This video summarises the content further down the page. We hope it’s helpful, whether you’re watching as we emerge from the pandemic restrictions or later. Monitoring the cash in your business will always be vital.

(Filmed during the first Lockdown, the content is still relevant to any business facing cash flow challenges.)

Your three options

We’ve got three different options for you to choose from when monitoring your cash, and in this section we’re going to outline each of them.

As with anything in business, there are pros and cons for each.

One will be the best option for your business; all you need to do is choose which, and make a start.

We’re here to help you or guide you in that decision making process and the implementation, so please do make sure that you incorporate one of them into your ‘new normal’ and the new habits we talked about in the earlier introduction video.

Option 1 – An Excel Spreadsheet

We’ve set up a template for you, including all of the necessary formulas, to make it as easy as possible.

  • Entirely free, but will require time, discipline and accuracy.
  • Quite considerable duplication of effort, as anything that goes into your bookkeeping software, also needs to be rekeyed onto the spreadsheet.
  • Will give you a false position if it isn’t accurate!
  • If you’d like to choose this option, you can download the spreadsheet here. Be sure to only key into the pink boxes, and start a new version regularly so you are consistently looking 90 days ahead.
An image from the Excel Based Cashflow Forecast

Option 2 – Fluidly Lite

  • A ‘bolt-on’ to your Xero and Quickbooks, Fluidly is super-simple to set up and will stay up to date as you do any bookkeeping on your software.
  • Fluidly Lite gives you a 90 day cash flow forecast for just £10+VAT per month (at time of writing).
  • No duplication of effort between Excel and your bookkeeping system, reducing the risk of errors and requiring little extra time.
  • Works on Artificial Intelligence, and makes assumptions based on historical data in your system. You’ll need to be aware of these, and may need to amend them to get a fully accurate picture of your cash position.
  • Your bookkeeping needs to be kept reasonably up to date to get the best outputs.
  • You can see Fluidly’s explanation video here.

Option 3 – Fluidly Pro

All of the above, plus the following:

  • Fluidly Pro gives you a 12 month cash flow forecast, which is particularly helpful if you’ve taken a bounce back loan and would like to aim to pay it back before it starts to cost you anything!
  • There is a monthly charge by Fluidly of £49+VAT for the Pro version of the software. This is significantly cheaper than the cost of the time it would take to prepare and keep a cash flow forecast up to date!
  • Pro gives you the chance to look at different scenarios in your business and the impact they may have on your cash. You could look at different levels of sales to see the impact they may have, or why not look at the impact of an increase in prices, or reduction in the time it takes to get payments into your bank? You can do all of those and compare the outcomes…
  • You can revert to Fluidly Lite with 30 days notice.
  • You can see Fluidly’s explanation video here.

OK, I’m up and running, now what?

1. There is little value in getting your cash flow monitoring set up unless you use it.

Set up regular appointments in your diary to review the outputs. Cross check the output to your Budgets to see how you’re progressing; are you ahead or behind? Look ahead and see where your cash is going to be tight.

  • Can you ease any outgoing payments to get you through a tight week or two?
  • Can you bring forward any billing to get funds into your account sooner, to get you through?
  • Do you need to look for external funding?

If you see a tight patch coming and aren’t sure what to do, give us a call!

2. Gather as much information as you can for the future.

This will enable you to look at as complete a picture as possible.

  • Get an estimate into your cashflow for the Corporation Tax you may need to pay later in the year.
  • Include the VAT payment you may have deferred this quarter, or any other bills you were able to defer.

Can my existing software do any of this?

Both Xero and Quickbooks have a cash flow function, but both are very limited in terms of their functionality. To be in proper control of your cashflow, you really need the enhanced level of accuracy and transparency that Fluidly can provide.

What else can I look at around my cash?

  1. We have a Guide to Controlling the Cash in Your Business that might be helpful. You can see a copy of that here.
  2. Your Cash Conversion Cycle is the time it takes for money to move through your business. It might be helpful to think about getting money in earlier, or holding on to it longer if you can!
  3. Review and refresh your Debt Collection Process to ensure your cash isn’t subsidising someone else’s business. We’ve mentioned before about new habits; now is the time to make sure you’re building good ones!

Monitoring your cash is, as we’ve said above, vitally important. We’d recommend it to any business, in any environment, but in the current economy it’s absolutely essential.

If you’re unsure how to get started, please get in touch and we’ll very happily help you. The sooner you start, the more benefit you will get from the process, and the more comfortable you’ll be with the process once you’re back to running at full speed.

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