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Cashflow Tips from the CFO Centre

Poor Cash Flow is the Biggest Threat to a Business

Fact is, 4 out of every 5 businesses fail due to poor cash flow management. It therefore stands to reason that cashflow management should be the number one priority for every business owner.

Every business owner needs to understand the cash impact of decisions and have in place a clearly defined and well managed strategy to avoid running into cash flow problems. Having the right cash flow management processes in place and being able to spot peaks and troughs in trading is one of the most critical components of the finance team. Company success hinges on an understanding of the organisation’s current and future cash-flow needs, and it is particularly during times of change that a healthy forward cash-flow is needed.

Installing systems to help manage cash can be done very quickly and at relatively little expense. Cash flow management should not be seen as a short-term fix to a problem, but should be part of the fabric of the business; a systematic approach, which should underpin every business wishing to ensure long-term stability.

There are many aspects to cash flow management but by way of a summary, some key aspects which should be considered are:

  • Review the scope of your cash flow challenges (funding sources, key projects, business expansion plans);
  • Create internal and external communication plans to make sure all parties are kept fully informed (bankers, suppliers, customers);
  • Ensure that the bank is reconciled and accounts are up to date;
  • Limit and consolidate your outbound payments to simplify the cash flow management process;
  • Determine immediate cost saving opportunities within the business;
  • Communicate with the bank so they are ‘on side’;
  • Discuss bank facilities with bank manager such as increased overdraft or other lending possibilities (you may have more options than you are aware of);
  • Devise a new short term cash flow visibility plan (cash flow statement) so that decision makers can see the cash impact of projected trading and investment decisions in advance
  • Review payments owed and devise strategy to accelerate inbound cash flow
  • Review outbound payments to suppliers and devise strategy to ensure suppliers are kept happy and to limit outbound payments where possible
  • Work with you to identify hidden or underperforming assets which can be monetized.

All the above is well and good, but many small to medium enterprises (SMEs) simply cannot afford top quality finance personnel to help drive and implement these type of finance strategies. However, this doesn’t always have to be the case – more and more businesses have discovered the affordable way to have CFO skill-set with a part-time, outsourced CFO.

For the cost of a junior admin person, a small business can have access to high calibre CFO’s with extensive commercial, strategic and financial expertise to help accelerate growth, manage risk, bring stability and control to finance departments as well as to provide more meaningful reporting to enable better decision making and stronger business performance.

To find out more, get in touch with Ecolease, who will introduce you to the CFO Centre to arrange a no cost discovery session at your business premises.


Marion Taggert-Holland

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