Cash is king. We've all heard this saying. And we've all experienced cash flow difficulties, either personally or in the business world. If you don't have cash you can't pay your bills, you can't pay your staff, you can't pay your suppliers, you can't pay yourself and you can't invest in your business.
Cash makes the world go around.
My 11-year-old son once said to me, when I showed him my empty wallet with no physical cash in it:
"Just use your card, Dad."
I don't believe that the children of today understand the real meaning of cash and cash flow. I didn't own a credit card until 28 years of age, so if I didn't have the cash, I couldn't buy things.
How times have changed.
If business owners can look at their business through a lens of cash, they can start to understand their businesses better and easier than ever before. Cash flow forecasting is about predicting your future bank balance so you can afford your future plans, preferably without having to use credit. And let's face it—you need cash in your bank for your business to run. It's about maximising your chances of success and minimising your chances of failure.
If you have set a goal (such as aggressive growth), a cash flow forecast shows you where you need to get to and how you are tracking against that goal.
Conversely, a good forecast will also show you if and when a potential disaster is approaching, giving you time to take evasive action.
Cash flow forecasting is fundamentally about the future; about planning and decision-making (rather than numbers and accounting); and is a critical first step in learning how to make your business run smoother and achieve its full potential. Once you've set targets and you know where you'd like your business to go, you're much less likely to spend money you don't have now.
One of the reasons you probably don't relish this task is because historically it has been a gruelling, tedious and manual job.
You've stored your bills and your invoices in multiple files and folders. Some have come in by post. Others by email. All that printing, filing, double-handling, triple-handling... it's a nightmare!
But it doesn't have to be that way.
Businesses that have adopted the cloud can hold information in a single, clear system without the need for double-handling data and cross-checking information. And cash management in the cloud is no different.
Cash management, and using the correct tools, shows you when cash is due to move in and out of your business, when cash has actually moved in and out of your business and what all this means for your future bank balance.
And even if what you're seeing is a range of possibilities, it allows you to prepare for those different futures, freeing up brain space to enjoy other parts of your life such as your family. Learning how to manage bills and invoices effectively will massively reduce stress, free up hours of your time and have a major impact on your cash flow.
So if you tend to think of managing bills and invoices as 'admin best done in your spare time' and often in the too hard basket, you might want to look at it from a different perspective.
Instead, think of cash management as 'a mission-critical business process dealt with by carving out and protecting time in your calendar', because if you approach the challenge from that perspective you'll probably find your life immeasurably improved.
Your short term cash is the beating heart of your business. Not spending time with your short term cash flow leads to firefighting and worry.
But if you do a little, often...you'll know what's coming up and you can deal with it easier.
I will leave you with this thought:
If you'd like to get your business' cash management into the cloud, let me show you how.