Cashflow Health Check

Are you struggling with the challenges of managing your cashflow?
You are not alone, with a recent survey revealing, ‘nearly 80% of small to medium Businesses have experienced a lack of cashflow in the past 12months.’ Many, a quarter, survived by not paying themselves a salary or dipping into personal savings.
Yes, running a successful Business isn’t easy, it takes courage and a range of skills to stay on top of things. It's weathering the ‘storms’, complexities and demands of everyday operations, including customer relations, Suppliers, and sales! Sound familiar!
The key to success is Cashflow, the amount of money going in and out of your Business. In today’s trading environment this flow has never been more important, vital if you are to remain financially stable.
To tackle cashflow challenges Businesses need to adopt 'sound' business strategies to keep the cash flowing now and to be better prepared for future challenges.
Firstly, let’s look at Cashflow, what it is and how it impacts your Business
Cash flowing-in is usually the money you get from sales but can also include sale of assets, grants or money from debt repayments.
Your outgoings include; wages, rent, maintenance, payments to suppliers and loan repayments.
Common flow causes include:
Declining revenue, inaccurate forecasting, low profit margins, lengthy payment terms and supply chain issues. Examples include;
- High overhead expenses: Having high administrative costs that support company functions but don't generate funds returns eg rent increases due to inflation
- Expensive debt: poor debt management practices or taking on too much debt or extending credit card debts
- Inadequate cash reserves: little or no backup cash on hand to cover emergencies and lean periods
- Seasonal fluctuations: Having seasonal highs and lows in sales, which can lead to extra costs like hiring more staff or buying more stock
- Excess inventory: Having excess stock reserves you can't sell, which ties up cash
- Decreasing sales: Selling products or services at low prices or offering discounts that reduce profit margins
- Slow payments: Receiving late or slow payments from customers, which means you've already paid for production but haven't been paid yet.
- Capital Expenditure: Upcoming fitout or new office fitout costs and new machinery acquisition's have significant impact on your cashflow
Impact on Operations and Growth
Business viability and sustainability, loss of confidence, yours and others, poor staff morale, operational inefficiencies and investment limitations. Simply put your Business is, is stifled and stymied and at risk of sinking.
These are the symptoms and causes of unhealthy cashflow, for remedies check our '8 Tips & Strategies'
