At HJS Accountants we can help businesses in the Southampton area with cash flow management and cash flow projections. Here are some of the things to consider.

Cash is the lifeblood of a business. Of course, the bottom line is important, but poor cash flow management can drive even a profitable company out of business, especially if the economy is struggling.

The risk is especially great for new and expanding businesses. For example, if billing is delayed at the same time as stock is accumulated to fill increased orders, you can find yourself short of the cash needed to pay suppliers and employees.

Cash flow projections

A properly prepared cash flow projection can help a business foresee and prepare for potential shortages and surpluses. Cash flow management can also help you:

  • Maintain adequate cash reserves to pay bills, expand the business and make capital improvements
  • Reduce interest costs through managed borrowing
  • Increase interest income by transferring funds into higher-interest accounts
  • Receive discounts through bulk purchasing
  • Better manage your relationship with the bank and other lenders

Businesses that prepare cash flow projections usually learn something about their systems, and the process even has some positive side-effects. For example, you might discover that you need to pay more attention to certain customers, or that you can time payments to suppliers more beneficially.

Getting started

A simple system can be set up by creating a spreadsheet to track cash flowing in and out. A more sophisticated analysis might include monthly cash projections for the next 12 to 18 months.

First, forecast your operations on a monthly basis for the period involved. You can project the cash coming in based on sales and the collection process. Material purchases are based on the amount needed for sales, adjusted according to variations in your stock levels as a result of turnover. Finally, payments to suppliers and expenses need to be taken into account, based on the payment due dates.

Once you've projected your cash flow based on this forecasted data, you can budget for capital expenditures, unusual sources of cash or other things that might affect cash flow.

A cash flow forecast can help you manage debt more effectively, maximise your return on excess cash and ensure that funds are available when they're most needed.

If you are in the Southampton area and would like help with cash flow management and cash flow projections, contact HJS Accountants.

Southampton Office

12-14 Carlton Place
Southampton
Hampshire
SO15 2EA

Tel: 02380 234 222

Winchester Office

6 Charlecote Mews
Staple Gardens
Winchester
SO23 8SR

Tel: 01962 842000

Reading Office

3 Richfield Place
Richfield Avenue
Reading, Berkshire
RG1 8EQ

Tel: 0118 9511 115

London Office

90 Long Acre
Covent Garden
London
WC2E 9RZ

Tel: 0203 470 0777