Cashflow and financial management

Dealing with the effects of coronavirus in recent months has put the spotlight on cashflow and financial management within businesses.

First, the coronavirus business interruption loan was announced to help many small businesses deal with cashflow disruption. 

The Government was to initially underwrite 80% of the loans to small and medium-sized firms, but lenders were slow to hand them out.

You can guess how that exposed businesses with irregular cashflow and may even push some over the edge. 

All of our SME services include cashflow and financial management strategies to cope with strains like the ongoing one caused by COVID-19. 

Business owners who receive these services were in a better place to absorb the economic shock while waiting for emergency funds to arrive. 

They had the flexibility to move quickly in response to changes in the marketplace on the back of the lockdown.

Other businesses, and there were almost six million of them in the UK at the end of last year, have not been so fortunate. 

Cashflow monitoring

Keeping tabs on your cashflow is vital to understand how money goes in and out of your business in the form of income and expenditure.

We take into account previous profits and losses, balance sheets and management accounts to indicate the health of your business. 

Most firms either have positive or negative cashflow, which determines what action you need to take both now and in the future.

Businesses with negative cashflow usually require additional sources of income to stay afloat and pay off any debts. 

Research from a high street bank recently claimed that cashflow concerns keep 63% of SME owners awake at night.

Positive cashflow basically means more cash flows into your business than goes out of it, enabling you to settle bills and invest in growth.

Those with positive cashflow before the coronavirus outbreak will emerge from the current crisis in the best shape.

Forecasts and tracking

A cashflow forecast charts how much money will go into a business over a fixed period and how much money will be paid out. 

These fixed periods can vary from a quarter to an entire year. It is usually divided into smaller sub-periods, such as months, weeks or even days. 

These show cash paid in and paid out, the positive or negative difference, and the bank balances at the start and end of the period.

Forecasts usually include an estimate of the amount of cash a business expects to receive and pay out, as well as actual amounts. 

For larger firms, this is done by setting growth predictions for the coming period alongside cashflow figures from the previous period.

Given the extreme volatility we are currently experiencing, regularly reviewing your cashflow forecast is advised.

If you are struggling to keep track of your business’s finances due to the coronavirus crisis, get in touch with us at advice@dunkleys.accountants or on 01454 619900. 

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