Managing cash flow

1
Managing cash flow

• Peter Sterling, Partner and
• Tyrone Courtman, Partner
• Cooper Parry

2
Objectives

• How to prepare a cashflow forecast
• Practical tips to improve your cashflow
• To stop you becoming one of my statistics!

3

• If you do not forecast and plan, your chances of
  failure are virtually guaranteed

4
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

5
(No Transcript)
6
P L forecast
7
Cashflow forecast
8
Forecasting sales and cash collections

• Review sales over the last 18 months is there a
  trend?
• Speak to Trade Associations
• Speak to customers
• Be realistic in the timing of cash collections
  60 days?
• Debtor days Trade debtors x 365
• Annualised sales x 1.175

9
Forecasting and controlling costs

• Raw material content of sales
• Build in a contingency
• Consider a no win, no fee with energy and phone
  consultants
• Strip out all non essential expenditure be hard
• Consider deferral of capital expenditure
• IF staff reductions are needed, act decisively
• Do staff reductions in one hit dont drip
  feed over many months
• Take back control of the cheque book
• Lead by example should the business owners
  salary/pension/dividend be deferred
• Strong leadership is vital

10
Speed up cash collections

• Dont leave invoicing until the last day of the
  month
• Dont include lots of pieces of work on the same
  invoice
• Speak in advance if the bill is likely to be
  contentious
• Put in place credit control procedures
• Speak to your customers to ensure that youre on
  their next payment run
• Get a commitment as to when youll be paid
• Put cash collection at the top of YOUR priority
  list
• Interim bill?
• Concentrate production resources on items which
  can be completed and billed in the month
• Be hard with non paying customers STOP

11
Stock and supply chain

• Clear out old and slow moving stock even at a
  loss convert to cash
• Speak to suppliers just in time/consignment
  stock/return unwanted stock
• Resource locally if exchange rate, transport
  costs, minimum order quantities and payments in
  advance are now an issue

12
Tax

• Get accounts done quickly if theres a loss
• File VAT returns on time and pay by direct debit
  for an extra 10 days credit
• For the self employed, can you reduce your
  payment on account at 31 January 2009?
• Dividends v Salary?
• HMRC to be more accommodating in cases of
  difficulty making tax payments

13
Financing

• Are there surplus assets which can be
  sold/re-financed?
• Use asset finance for capital expenditure, not
  overdraft
• Take security for directors loans

14

• Prepare detailed forecasts and keep updating
• Be ruthless in your review of cost
• Make cash YOUR priority
• Strong leadership is vital this is YOUR job
• Improve your production, invoicing and cash
  collection processes to free up cash
• If youve made a tax loss get your accounts done
  quickly

15
Survive and Thrive

• Support for businesses in tough times