Monitoring your Cash Flow…

There’s a very good reason why we’re making Monitoring Your Cash Flow the first of our Rebound Resources!

It’s absolutely paramount to any business coming out of the Lockdown upheaval to be really aware of what their cash position looks like.

  • You may have been closed, with no sales, for more than 10 weeks.
  • 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 lockdown with borrowings, either as a Bounce Back loan scheme or a CBILS loan, that you hadn’t even contemplated in February.
  • You may have had to refund deposits for events that couldn’t go ahead, or services you couldn’t supply during lockdown.
  • After 1st August, you may need to pay a proportion of the 80% salary for any furloughed staff as the changes to the Furlough scheme come in.

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

All of that said, if you manage your cash carefully, with the injection of capital that may have come from the Government grants, the furlough scheme and any BBLS or CBILS 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!

 

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.

Image of Excel Spreadsheet Income Sheet

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.
  • 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.
  • If you’d like to get started on this option and are a client, pop us over an email and we’ll send you back an invitation to the system.

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 £19.50+VAT for the Pro version of the software. We don’t add any supplement to this amount, charging it on to clients at cost.
  • 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.
  • If you’d like to get started on this option, again, send us an email and we’ll arrange the Pro invitation to come out to you, and add the monthly charge to your direct debit.

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. We’ll be looking at that in a future session, but 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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Image of Excel Spreadsheet Expenditure Sheet

 

 

 

 

 

 

 

 

 

 

 

 

 

Image of Excel Spreadsheet Assumptions Sheet

 

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