Accounting software is critical to cash flow improvements.
Doing the numbers in your head can quickly lead to a cash flow shortage and will not improve cash flow. Financial or accounting software gives you insights into revenue and spending, and places the financial control in your hands. While you might not be doing the data entry, the reports generated will be of immense value.
Your bookkeeper or finance controller can schedule supplier payments, organise to collect debtors, and more accurately forecast and manage the cash flow inputs and outputs to meet the budget requirements. Modern cloud accounting software makes it easy to stay on top of your financial situation, and it’s inexpensive and easy to use.
Run your business and access your accounts from your computer, tablet, or smartphone. Invite your accounting professional to view your accounts and provide valuable real-time advice. Your data is completely secure, even if your computer is lost or stolen, and backup problems are a thing of the past.
Preparing cash flow projections for next year and next quarter, and if critical, next week, is more straightforward to organise and manage in your accounting system. An accurate cash flow projection can alert you to trouble well before it strikes. As difficult as it might be to prepare a cash flow budget, it’s one of the most important activities if you want to sleep at night.
What to do if your business runs into financial difficulties.
Sooner or later, you will find yourself in a situation where you don’t have enough cash to pay your bills. This doesn’t mean you’re a failure. It’s pretty standard to make mistakes when predicting the future. It happens to everyone. Be assured that there are standard, everyday business practices that can help you manage shortfalls and any associated problems.
The first thing to do is to seek professional advice. You may need to contact an insolvency practitioner or business recovery expert immediately. They can advise on whether or not your business can get back on its feet. Always remember that Limited company directors who allow their company to continue trading despite being insolvent can be held liable for any debts.
If you have problems paying taxes, you should prepare a payment plan and approach the tax office. As long as the plan is reasonable, viable, and sufficiently short-term, you have a good chance of it being accepted. Consult your solicitor if you are sued, as you don’t want to make any mistakes when your business and reputation are at risk.
You can ask your suppliers for extended credit. If the problem is only temporary, it should be emphasised and why you require an extension. If you can, try to pay all your suppliers a portion of what you owe them to buy yourself more time. Above all else, keep up regular communications. Creditors will get nervous when they don’t hear from you. The knowledge base holds many answers to financial problems.
Quotable quotes
“One of my earliest lessons was that balance sheets and profit and loss statements don’t pay the bills; cash flow does”. Peter Sergeant
“When profits are down, clean out cash traps and invest in more and better opportunities”. Peter Sergeant