The entire business ground to a halt by June, because it had run out of cash.
Oh, sorry – that’s the *end* of this story. Let’s start from the beginning instead…
Late last year, I spoke with a business owner who always prepares the annual profit-and-loss accounts for his company himself, and he was feeling very pleased with it all.
He’d drawn up a profit-and-loss forecast for this year, too. It was quite detailed, and beautifully formatted, with bold font and colour coding to highlight different areas.
The whole thing must have taken him at least several hours, over multiple days, to complete.
But the moment I looked at it, I could see that it was almost meaningless.
The details were nothing but more rows and columns filled with numbers. There was no connection to the real world question of how those predictions would come to pass, and no indication of precisely when all that money would appear in his bank account…
…so there was nothing to indicate how his company would fund the necessary investment at different points in the year.
I asked him how he knew his business would thrive in the way his (very optimistic) forecast suggested, and he pointed to the forecast profit figure and said, “It’s right there.”
Face, meet palm.
Doing a once-a-year profit and loss accounting exercise isn’t enough; you need to plan your *cash flow* too! In fact, it’s vital.
Otherwise, as this business owner found out to his dismay, your business can literally fall apart from lack of cash halfway through the year… even while your annual forecast says you’re due to make big profits by year end.
As the financial leader of your company, it’s your job to make sure that never happens to you.
So it isn’t enough to just check whether or not there’s money available right now to fund your next steps… Or whether you’ll end the year in profit
You have to plan your cash flow, and monitor it month by month, so that you know where and when the money goes in and out of the company.
Not only that, but you also need to know how you’re going to influence those numbers. And that’s about knowing exactly what you will do to make sure you have enough cash when you need it to fund your activities.
That doesn’t happen when you’re shooting from the hip.
Most business owners don’t look closely at their cash flow when they’re planning their company’s finances and future development.
But you are not like most businesses. At least I hope you’re not.
I hope you’re much smarter than that, because you can gain a distinct advantage just by planning better than your competitors.
And it doesn’t have to be hard work, because planning your cash flow is one of the key things we can do for you.
So if you want to be sure that you’ll have cash on hand all year when you need it…
To be able to invest your time, money, and energy in growing your business instead of struggling to bridge gaps and overcome obstacles you didn’t anticipate…
…then now is the time to make a smart business decision and get in touch with us.
Together, we’ll make sure that your growth plans will drive your company in the direction you want it to go – and make sure it can all be realistically funded, too.
