Accountancy technology and money

Can’t buy me…

There are plenty of things money can’t buy – but there are plenty of things it can!

There are the necessities – food, clothing, shelter.
There are the luxuries – different things for different people obviously! Holidays, theatre trips, sparkly jewellery, an Aston Martin, a massive TV with surround sound, escaping on a boat to a Hebridean idyll…

But there are also the intangibles – security and peace of mind, freedom from worry. Arguably more important than the luxuries.

And never more important than for the business owner, knowing you can pay your employees, your suppliers, yourself, even HMRC!! And knowing you have a future.

Cash as liquidity in terms of the health of a company is vital. Many a business owner has learnt the hard way that profitability does not equal cash. How many times have you heard ‘cash is king’? Maybe a bit of an over-used phrase but never so true as now, with the turmoil we have been pitched headlong into, with the full impact of Covid-19 still unravelling.

Research, including Xero’s own Small Business Insights, continually points to the pressure business owners are under, with late payments by customers leading to pressure on cash flows – and of course the accompanying mental stress. And on top of that a significant proportion of businesses will fail because of lack of capital and failures in cash management.

So what can you do – you can create products and services, and find customers to sell them to, but you can’t create money!

No – but you can monitor and manage your cash, your debt. And you can plan for all scenarios. There are different ways of doing this – many business owners and managers will have created their own spreadsheet where they track the bank balance and manage who they are going to pay, and when. Then you might have another spreadsheet with budgets and different scenarios, which will need to be updated with actuals to understand progress (or lack of).

But, better than that, in the world of cloud accounting we have tools which can give you an integrated debt and cash management solution. With data pulled directly from your accounting system you will have an accurate actual position from which to monitor your projected balances – as long as your accounts are up to date.

Chase late payers, and even better, set up automated reminders which are proven to speed up the payment of debt. Manage your debtors, update with promised dates rather than due dates which might have passed. And then chase again when those promised dates are also breached.

And as well as managing your debtors you can plan:

  • What happens if – X doesn’t pay, Y pays late, you want to take on new staff, you need to let staff go, you experience sales growth, you want to open a new outlet/office, you need to buy new equipment
  • What happens when – the VAT is due, the PAYE, the Corporation Tax, loan repayments etc etc
  • Can you afford to – take a holiday, buy a car

As an accountant I have long been an advocate of Float; it is my choice for short-term cash flow for Xero users, best used on a daily basis by business owners and managers, the accountant in the business. The best apps have all developed as a solution to a problem, and Float did just that – it replaces that cash flow spreadsheet which so many business owners and accountants have developed, and which is their comfort blanket (and quite rightly so). But maybe more importantly as a new business owner at Bridge Financials, I have discovered for myself the pleasure (yes, I said it!) of logging in, updating my budgets and looking at what I need to do to build my business. I can see at a glance the actual and projected bank balance, actual expenses versus budgets. And, with a start-up in a time of a pandemic, nothing is more important (apart from maybe LinkedIn…)

We all want peace of mind – and yes, we would probably all like those luxuries as well as the necessities. With robust cash-management you can plan for the highs and lows – maybe even avoid the latter.

Cash management is so much more than a long-term projection, and with good cash flow management in place, a business can focus on not just surviving, but actually thriving. Book a call with Bridge Financials today to talk through how we can help you manage your cash.

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