Cash Flow Planning & Cash Flow Finance

1. Why is Cash Management
important?
 There is a saying: Turnover is Vanity, Profit is Sanity, Cash is King
– cash in whatever form is the life blood of any business.
 Ability to be informed about your company means that you can
make decisions with a good base of knowledge:
 Will I be able to pay end of month wages
 Can I purchase that new equipment
 Should I take on the new contract
 What happens to companies that do not have this information – a
well know statistic is that 85% of businesses fail in the first 5 years
and the most common reason is “lack of cash”.
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For more information see www.daviescorporate.co.uk/cash-flow-finance

2. Who does Cash Flow
Management?
 In essence – not many businesses.
 For many SMEs there is not enough hours in the day to complete
the work they have – let alone manage the cash!
 Most companies, do not have a full time “finance” post – even if
there is an Accounts person/department – they do not plan and
manage the cash.
 Large corporates tend to have a dedicated person whose sole
responsibility is to forecast the income and expenditure of the
business – there is obviously a ROI for their salary!
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For more information see www.daviescorporate.co.uk/cash-flow-finance

3. A Cash Flow Cycle
Day 1: Order Goods
Up to day 14 – receive
goods
Day 25 – 40 receive invoice
for goods/stock purchased.
Goods are then produced and
at some time in the future
sold!
After Order or sale the goods
are delivered to customer – say
3-5 days
Invoice produced and forwarded
to customer for payment
Assuming credit terms of 30
days – payment received
Min Number of days cash Flow
could be 45-60…maximum could be
200+ depending upon production.
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For more information see www.daviescorporate.co.uk/cash-flow-finance

4. Cash Planning
 Based on the previous cycle – it is key to plan.
 Cash Flow forecasting – a requirement to plan – details expected
income, known expenditure and when they are due to happen.
 Many aspects have to be forecast – but remember a sale is not a
sale until the money has cleared!
 Remember to be realistic – there is no point in assuming that you
will convert all estimates/bids for business – look at past info.
 Some companies prepare 3 forecasts – optimistic, realistic and
pessimistic – to plan for all eventualities.
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For more information see www.daviescorporate.co.uk/cash-flow-finance

5. Cash Flow –
The Ins and Outs
Accounts Receivables – collecting payments:
 Around 77% of business sales are on credit terms. Always issue credit terms with
your invoice.
 Normal term 30 days….but lots of variations! Ensure that your customers are aware
of your payment terms.
 Ensure that you have in place a credit control system….and do not be afraid to chase
for your money!
 Always credit check a new client before you accept an order …. regularly check
existing customers.
Accounts Payable – your payments out :
 Ensure that you know your suppliers terms – and pay on time.
 As much as possible, ensure that your business has a good credit rating and use it to
obtain accounts and even discounts from suppliers. Negotiate discounts for cash
payment.
 Verify/check invoices before they are paid.
 Manage your payments – plan when it suits YOUR cash flow to pay.
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For more information see www.daviescorporate.co.uk/cash-flow-finance

6. Top Cash Flow Tips
 Ensure that you let your customers know when they are due to pay you.
 Whilst always happy to get new orders from new clients – remember to
credit check them. Establish a credit granting application form. If new to
you, who were they dealing with before – have they been put on stop!
 Keep good records – if a payment is late, make sure that you chase
immediately.
 Keep a cash flow forecast – use it and update it – it is a great base for
decisions.
 Establish supplier accounts, relationships where possible – if not try to
obtain discount for cash .
 Try to keep stock to a minimum – it uses valuable cash assets to keep
items ready for sale. Invest in a good stock control system.
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For more information see www.daviescorporate.co.uk/cash-flow-finance

7. More Cash Flow Tips
 Sounds crazy……but remember to invoice as soon as possible
and include:
 Bank Account Details – BACs payments are cleared
funds the day they are received…a cheque can take
between 4-7 days to clear!
 Date when the payment is expected to be received by
you.
 If possible use electronic means to send invoice – email, is much
quicker.
 Not always possible, but call the customer’s accounts depts. to
verify everything OK with invoice and it is the next payment run.
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For more information see www.daviescorporate.co.uk/cash-flow-finance

8. Cash Flow Solutions –
alternative finance
 Rather than resort to your credit card….there are other ways:
 Bank Overdraft facility – perfect if you qualify – but likely to require
security.
 Business Loan – Government will guarantee some requests – criteria
apply, but not really used for cash flow purposed more for asset
purchases. Bank will certainly require security. Options available:
•Construction
•Recruitment Finance
•New Start Business Finance
•Trade Finance
•Export Finance
 Venture Capitalists, Angel investors
 Factoring
 Invoice Discounting
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For more information see www.daviescorporate.co.uk/cash-flow-finance