A google search of the word “cashflow” produces over 14 million hits, yet this remains one of the most misunderstood elements within business. Clients of JMp are not immune either. We have found that in these tighter economic times, cashflow is the first thing that suffers and this creates other problems if ignored for an extended period of time.
In this first part, we explore some of the common causes of cashflow problems that we have uncovered when conducting cashflow improvement reviews for our clients.
Failure to Plan
To put it simply, a failure to plan is a plan to fail. A proper cash flow plan includes all estimated cash inflows and cash outflows over a future period of time. It is best done a daily basis one month in advance, and on a weekly basis for at least three months and forecasting up to 12 months ahead.
The cash flow plan will predict when the business is likely to experience surplus cash flows and when there will likely be deficits. It is these deficits that must be planned for before they occur.
Business and Personal Cashflow Do Not Mix
Time and time again we have seen clients using surplus cash flows generated by their business for personal affairs. Whilst this of itself is not necessarily a problem, when this is accompanied by a failure to plan, or where the plan fails to predict a business downturn, severe financial hardship results. In extreme cases this can lead to liquidation of the business, loss of personal assets and occasionally bankruptcy.
If you are would like to discuss your own cashflow issues and how JMp can assist, contact us at firstname.lastname@example.org.