Cash is King... Cashflow management

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Cash is King... Cashflow management. Working capital. Working capital. Debtors: speed up cash collection. Put in place credit control procedures Check invoices are being paid before they are due Get commitment re payment date - PowerPoint PPT Presentation

Transcript of Cash is King... Cashflow management

  • Cash is King...

    Cashflow management

  • Working capital

    Sheet1

    '000

    Sell100

    Cost(40)

    Profit60

    0-30 days30-60 days60-90 days90-120 days

    Pay suppliers (creditor)(40)

    Customers pay (debtor)100

    Bank balance(40)(40)(40)60

  • Working capital

    Sheet1

    '000

    Sell100

    Cost(40)

    Profit60

    0-30 days30-60 days60-90 days90-120 days

    Pay suppliers (creditor)(40)

    Customers pay (debtor)100

    Bank balance010010060

  • Debtors: speed up cash collectionPut in place credit control procedures Check invoices are being paid before they are due Get commitment re payment date Speak to the customer if invoice is likely to be contentiousDont include lots of work on one invoiceDont leave invoicing til month endConcentrate production resources on items which can be completed and billed in the monthInterim bills? Put cash collection at the top of YOUR priority list Be hard with non paying customers STOPCredit checking and credit limits

  • StockClear out old stock even if at a loss, convert to CASHSpeak to suppliers just in time/consignment stock/return unwanted stockResource locally if exchange rate, transport costs, minimum order quantities and payments in advance are an issueExtend credit taken from suppliers

  • Why forecast?To quantify how much cash you need

    To be on the front foot in discussions with your bank

    To see if you are going to breach banking covenants

    To help fulfil your legal obligations as a director

    To force you to review every aspect of your business

  • TaxGet accounts done quickly if theres a loss

    File VAT returns on time and pay by direct debit for an extra 10 days credit

    For self employed, can you reduce your payment on account?

    HMRC more accommodating in cases of difficulty making tax payments

  • Be ruthless in your review of cost Make cash YOUR priority Strong leadership is vital this is YOUR job Take control of the cheque book

    Take security for directors loans

    Do you have surplus assets you could sell?Other tips

  • 3 Centro PlacePride Park, Derby, DE24 8RFT: 01332 295544 F: 01332 29560014 Park RowNottingham, NG1 6GRT: 0115 9580212 F: 0115 95888001 Colton SquareLeicester, LE1 1QHT: 0116 262 9922 F: 0116 262 8219cooperparry.comContact us

    *Encourage Qs as we go2 minsWorking capital accounting terminology

    Talk through P&L apparent profit of 60

    Cash impact, pay for goods before receive money from customerDr - 100 for 120 daysCr - 40 for 30 days

    Cash negative

    Profit does not = cash

    2 minsWorking capital accounting terminology

    Talk through P&L apparent profit of 60

    Cash impact, pay for goods before receive money from customerDr - 100 for 120 daysCr - 40 for 30 days

    Cash negative

    Profit does not = cash

    Force to reviewIdentify possible cost savings, better processes etcHelps planning for work force changes, cant turn the tap off and get rid straight away, there is a process

    Monitor on an ongoing basis not one off exercise to be left in a drawer*