The term ‘cash flow projections’ is used interchangeably with the words ‘cash flow forecast’, ‘cash flow management’, ‘cash flow planning’ to name a few. Essentially they all mean the same thing; planning, forecasting or projecting the cash that is going in and out of the small business during a period.  That period could be annually, monthly, weekly, or daily.  It depends on the business.

Importantly, cash flow forecasting /cash flow projections are critical to success in any business. Cash flow forecasting is a business tool that all small business owners/entrepreneurs must engage with to effectively manage the success of their business.  Failure to understand cash flow within a business, and the business becomes vulnerable and out of control.  Cash is King (or Queen) in business.  Profit is important, but it doesn’t pay the wages and the bills.  It is cash that does that!

Many entrepreneurs manage their business from one cash flow crisis to another, simply due to poor or no cash flow projections (or cash flow forecasting) having been done in the business. I think many small business owners are frightened of ‘the numbers’ in business, or don’t want to spend the money asking their accountant or book keeper to do the work for them, or they don’t spend time working ‘on’ their business, preferring to work ‘in’ the business, working within their comfort zone.

Cash flow forecasting is done in all large businesses around the world with incredible accuracy. In fact it is so important to large businesses, that they have large teams of finance and treasury staff managing the cash flow on a daily basis.  For example, a very dear friend of mine is a senior finance executive in a multinational business.  She knows the daily cash balance and the net in and out flows to the business down to the last dollar, as they manage cash flows that carefully in the business, given its importance to the business.

While small business is not of that scale, it is similarly important as small business owners are responsible for paying staff (often) and they have monthly business expenses to pay. Consistently not being able to meet its financial obligations could well result in the business failing, and staff, who depend on the business for their income, being made redundant.

For many small businesses, cash flow forecasting is not difficult to do, by virtue of the fact they are small businesses.   Cash flow projections templates can be freely downloaded from the internet and used to accurately plan for cash flow within the business.  As well, many accounting systems can ‘spit out’ cash flow forecasts as a report, so long as the correct information has been put into the system when the accounts receivable or payable was entered into the accounting system in the first place, and so long as the book keeper or accountant includes all other accounting transactions that have a cash flow impact.

There are two steps to cash flow forecasting or cash flow projections. The first is to forecast/project the money the small business expects to receive in cash and pay out on any given day/week/month (if managing daily/weekly/monthly), starting with an opening balance of cash in the bank (or overdraft amount), on day one.  Secondly, at the end of the period the business needs to re-forecast the cash flow based on what actually happened in the business, so that the small business owner has an accurate account of cash flow at all times.

For instance, let’s say an account of $10,000 is due to be paid by a customer on 20^th of the month, and is put into the monthly forecast as such.  If the customer doesn’t pay on that date, at the end of month the small business is going to have $10,000 less in the bank than it predicted, and that will potentially have an impact on what expenses can be paid at month end.  Therefore, the cash flow needs to be re-forecast at the end of the month to allow for the late arrival of the $10,000 into the account and late payment of business expenses.  This exercise happens on a monthly cycle, as cash flow projections or forecasts are just that, projections or forecasts.  They are not accurate day to day unless they are updated daily.

It might seem like a lot of work, but it is necessary work for a small business. However, it should be delegated within the business, so the small business owner can continue working in the business, and simply reviewing the cash flow information that is provided to them.  With that information, it is likely that customers will need to be chased up for payment of their accounts if they are late in paying, or creditors may need to be spoken to about delaying their payments if there is not enough cash in the bank.

Information is power. Cash flow projections/cash flow forecasting provides information on which to act.  So, how about it?  How about arranging a meeting with your accountant or book keeper to seek their help in preparing cash flow projections for your business, so you maintain control of it!

If you would like to learn more on how to address the cash flow issues in your business, then please go to www.adelemclay.com/free-resources and download my SPEARHead System™ – 50 Strategies For Supercharged Small Business Cash Flow.

Could some guidance from me be helpful to you?  If so, please arrange a free 30 mins Skype strategy meeting with me.  Here’s my calendar to book a meeting.  I’d love to support you in some way to gain ‘seductive clarity’ in any aspect of your business or life.

Other articles on Small Business Cash Flow:

Small Business Cash Flow – The Ultimate Guide
Cash Flow Problems in YOUR Small Business
Small Business Problems – Why are YOU in Business?
Small Business Cash Flow Problems
Cash Flow in Business
Projected Cash Flow – Relevant to Business? How to Solve Cash Flow Problems: Inventory Turn

The term ‘projected cash flow’ is used interchangeably with the words ‘forecasted cash flow’, ‘management of cash flow’, ‘cash flow planning’ to name a few. Essentially they all mean the same thing; planning, forecasting or projecting the cash that is going in and out of the small business during a period.  That period could be annually, monthly, weekly, or daily.  It depends on the business.  So, is the concept of projected cash flow relevant for small business entrepreneurs?

The short answer is YES!! A projected cash flow statement is the saviour of business, and is critical to success in any business.  Cash flow projecting is a business tool that all small business owners/entrepreneurs must engage with to effectively manage the success of their business.  Failure to understand cash flow within a business, and the business becomes vulnerable and out of control.  Cash is King (or Queen) in business.  Profit is important, but it doesn’t pay the wages and the bills.  It is cash that does that!

I think many small business owners are frightened of ‘the numbers’ in business, or don’t want to spend the money asking their accountant or book keeper to do the work for them, or they don’t spend time working ‘on’ their business, preferring to work ‘in’ the business, working within their comfort zone.

Projected cash flow statements are important as small business owners are responsible for paying staff (often) and they have monthly business expenses to pay. If a small business is not consistently able to meet its financial obligations, the business could fail, and staff, who depend on the business for their income, being made redundant.

For many small businesses, projecting cash flow is not difficult to do, by virtue of the fact they are small businesses.   Templates that help in creating projected cash flow statements can be freely downloaded from the internet and used to accurately plan for cash flow within the business.  As well, many accounting systems can automatically prepare cash flow projections, so long as the correct information has been put into the system by the data entry team.

Projecting cash flows might seem like a lot of work, but it is necessary work for a small business. However, these administrative tasks should be delegated within the business, so the small business entrepreneur can continue working in the business, and simply reviewing the cash flow information that is provided to them.  Armed with a projected cash flow statement, the entrepreneur can then work ‘on’ their business and direct action that needs to occur to improve cash flow.  For instance, it is likely that customers will need to be chased up for payment of their accounts if they are late in paying, or creditors may need to be spoken to about delaying their payments if there is not enough cash in the bank, sales may need to be improved, inventory levels reduced… decisions that can only be taken once a projected cash flow statement is to hand.

Information is power. Projected cash flow statements provide information on which to act; ensuring the business entrepreneur has their ‘finger on the pulse’ of their business.  Cash is the lifeblood of business and must be carefully monitored at all times to ensure small business success.

If you would like to learn more on how to address the cash flow issues in your business, then please go to www.adelemclay.com/free-resources and download my SPEARHead System™ – 50 Strategies For Supercharged Small Business Cash Flow.

Could some guidance from me be helpful to you?  If so, please arrange a free 30 mins Skype strategy meeting with me.  Here’s my calendar to book a meeting.  I’d love to support you in some way to gain ‘seductive clarity’ in any aspect of your business or life.

Other articles on Small Business Cash Flow:

Small Business Cash Flow – The Ultimate Guide
Cash Flow Problems in YOUR Small Business
Small Business Problems – Why are YOU in Business?
Small Business Cash Flow Problems
Cash Flow in Business
Cash Flow Projections – Important in Business?
How to Solve Cash Flow Problems: Inventory Turn

What is cash flow in business? Cash flow is the sum of all the cash received into your business, less all the cash payments being made from your business.  Positive cash flow is when there is more cash coming into the business than is being paid out of it.  Negative cash flow is when there is more cash being paid out of the business than is being received by the business.

Cash flow business issues arise in a small business for two major reasons:

• The small business doesn’t have enough revenue (gross income) coming into the business compared to its expenses, and/or
• The small business doesn’t have good internal financial management and administration procedures in place to support the business. This could mean the business has difficulty collecting its accounts receivables; it has too much cash tied up in stock; and/or it is spending too much money on business overheads/expenses/assets.

Many small businesses mostly focus on gross income and profit – before or after tax. While both are important in business, cash flow is the life blood of all businesses, and without it they eventually die.

Think about blood in relation to your body. If you lose all your blood, you will die.  It is the same in business:  have no cash and the business will eventually fail.  While a business can sustain negative cash flow for a while if it has ample cash reserves, most small businesses do not, so consistent negative cash flow will wipe out a business.

Yet, very few small business entrepreneurs spend much time thinking about cash flow or understand how critical a business driver it is. The key transactions in business that affect cash flow are:

• Sales (cash and credit).
• Purchases (inventory and business expenses).
• Business loans (new and repayments).
• Business assets (buying and selling them).
• Investments (new and repayments).

The key principles of good cash flow management are simple. Firstly, the small business needs to ensure it has more income coming into the business than expenses; and the business needs to have its accounts receivable paid on time so it can pay its own creditors.

I have developed the SPEARHead System™ – 50 Strategies For Supercharged Small Business Cash Flow to support small business entrepreneurs around the world get to grips with cash flow in business issues, so that it is a thing of the past.  Why the SPEARHead?  Well, the system addresses all the cash flow issues in small business as follows:

S – Sales Receivables

P – Purchases and Payables

E – Expense Management

A – Asset Acquisition

R – Residual Cash

Head – How does your business ‘head –off’ or ‘SPEARHead’ its competitors in the market?

It is critical that each of these factors is actively managed to improve the cash flow in business. Equally, cash and financial management is not necessarily the primary skill set of a small business owner, so it is important that they get help.  An accountant or business manager can offer invaluable assistance, as can a book keeper or personal assistant, as they can collect accounts receivables outstanding; they can help with expense management; they can look for and perhaps negotiate for c cheaper input costs for the business.  If the small business owner asks others to help them in managing their business, they can work on the parts of the business they are good at, which is very often the sales or business development side of the business.

All parties working together will see the cash flow business issues reduce or hopefully be a thing of the past. Doesn’t that sound attractive?  I think so.

If you would like to know more about the SPEARHead System ™ and how it might help minimise the cash flow business problems in your business, please go to www.adelemclay.com/free-resources to download my SPEARHead System™ for free.

Could some guidance from me be helpful to you?  If so, please arrange a free 30 mins Skype strategy meeting with me.  Here’s my calendar to book a meeting.  I’d love to support you in some way to gain ‘seductive clarity’ in any aspect of your business or life.

Other articles on Small Business Cash Flow:

Small Business Cash Flow – The Ultimate Guide
Cash Flow Problems in YOUR Small Business
Small Business Problems – Why are YOU in Business?
Small Business Cash Flow Problems
Cash Flow Projections – Important in Business?
Projected Cash Flow – Relevant in Business?
How to Solve Cash Flow Problems: Inventory Turn

Small business cash flow problems are an issue that afflicts many small business entrepreneurs across the world. Here are my top tips for getting through crisis situations in relation to small business cash flow problems.

Reduce the cash tied up in the business’s operating cycle

Accounts receivable and inventory holding can be major drains on cash flow. In a crisis situation, it is key that the business owner reduces the money held in accounts receivable by assertively collecting outstanding customer payments. At the same time, the business owner must increase the inventory turn so that there is less cash tied up in inventory in the business.

Review and increase the business’s gross profit margins

Essentially, this means either increasing the sales price of the products and services sold or reducing the cost of producing the goods (cost of goods sold).

Reduce the operating expenses within the business

A business often incurs too many expenses for its size. With serious attention a business owner can heavily reduce expenditure and therefore improve cash flow.

Reduce sales volumes

By reducing the sales volumes, by default sales and the cost of goods sold will decline. As a result, inventory holding will decline as will the money tied up in accounts receivable. This method of cash flow control is difficult for small businesses to implement and, if undertaken for a considerable period, will require the business owner to substantially reduce operating expenses. This should be considered as an emergency response only.

Ask suppliers for extended payment terms

Delaying the payment needs to be a short-term solution for managing a negative cash flow as it can affect a business’s credit rating with its suppliers. Holding back on the payment of inventory and other operating expenses will have a positive impact on cash flow. The practise of delaying payment of invoices is illegal in some countries, so a better option is to proactively ask your supplier for extended credit terms to help your business through the cash flow crisis.

Borrow money

Borrowing money from banks, family or friends can help a business through short or long-term cash flow crises.

Find equity capital

If the cash crisis is ongoing, another option for a business is to find an equity partner that will contribute cash in exchange for a percentage of the business. This is fraught with danger if the wrong equity partner is found, as things can go very wrong in the business. Equally, it can be a real opportunity if the equity partner is genuinely interested in helping the business grow and become more profitable and successful. When considering this option, make sure your business gets the correct business advisory support to ensure the deal is not too one-sided in favour of the new equity partner.

Hold cash reserves

This is the pie-in-the-sky option for businesses existing hand to mouth each month and unable to amass cash reserves at the bank. Regardless, the only way in which a business will be less impacted by negative cash flows is to have a cash reserve. The best way to have a reserve is to put a bit of money aside for a rainy day during good times. I can promise you that after your business experiences a few nightmarish cash flow crises, you will never want it to happen again, so finding money to put aside for the future is the best way to protect the business for the future.

Perhaps it is comforting to know that most entrepreneurs experience small business cash flow problems. If you know Sir Richard Branson’s entrepreneurial story, you will know that on many an occasion his businesses had no cash, and the banks were close to closing him down.

The key is NOT to put your head in the sand and hope it goes away. Small business cash flow problems come with the territory of being in business.  Be front footed in addressing the issues.  Talk to people who may be able to assist – your customers (to get paid quickly); your suppliers (to get extra credit); your accountant (to assist in trimming costs from the business and other business consulting support);  your bank (to get extended credit if possible); potential equity parties (if your business can sustain this option).

If you would like to learn more on how to address the cash flow issues in your business, then please go to www.adelemclay.com/free-resources and download my SPEARHead System™ – 50 Strategies For Supercharged Small Business Cash Flow.

Could some guidance from me be helpful to you?  If so, please arrange a free 30 mins Skype strategy meeting with me.  Here’s my calendar to book a meeting.  I’d love to support you in some way to gain ‘seductive clarity’ in any aspect of your business or life.

Other articles on Small Business Cash Flow:

Small Business Cash Flow – The Ultimate Guide
Cash Flow Problems in YOUR Small Business
Small Business Problems – Why are YOU in Business?
Cash Flow in Business
Cash Flow Projections – Important in Business?
Projected Cash Flow – Relevant to Business?
How to Solve Cash Flow Problems: Inventory Turn

I have coached and mentored many small and large businesses to improved financial performance over the last 20 years in several countries, along with a number of charities, and I have received a variety of answers to the question: ‘Why are you in business?

So, I ask you. Why are YOU in business?  Think about it and make a list of why….

Are your answers similar to those I have heard over the years:

• To be my own boss.
• To live my dream.
• To bring my product or service to market, as everyone will need my product/service.
• To help others.
• To have a successful business.
• To make a difference, and to make my customers happy.
• I am the ultimate entrepreneur and couldn’t work for anyone else.
• To earn the money I am worth, rather than receive a salary working for someone else.
• To control my life.
• To contribute to the lives of those who are less fortunate.
• To deliver social/community programmes.

If you answers are any or some of the above, while they are good and at times noble reasons for being in business, they are NOT the reason you are in business.  There is ONE reason and ONE reason only as to why you are in business…… and that is:

TO MAKE MONEY…. and hopefully, lots of it!

There is no other reason to be in business. If you have any other reasons for being in business, they must be secondary, otherwise you will have small business problems!

Yes, by being a financially successful business or charity, you will achieve some or all of the above points, but they are not the principle reason WHY you are in business. They are the results of being financially successful in business.

Over the years I have seen so many small businesses not focused on money – the cash-flow and profit (or lack of) in their business… a lack of focus on these areas lead to small business problems. The net result is that they are unsuccessful and fail, or struggle, with the owners living a ‘hand to mouth’ existence….. and, not achieving the dream they have set for themselves and their families.

In my opinion, there has never been a better time to be in small business…. as Lord Digby Jones, a UK based businessman, and UK Trade Ambassador recently said: ‘It is small business that will lead the UK economy out of recession in the coming months’. Whichever economy you are in, I wholeheartedly agreed with the sentiments.  But, small businesses will only lead economies out of recession, if they themselves are financially successful.

So watch out for my key strategies to make significantly more profit in your small business. In the meantime, get focused on making money… that is the only reason why you are in business.  Successful businesses leads to having fun in business.  Marginal or unsuccessful businesses lead to constant small business problems, challenges and issues.  Which would you rather have?  I know that the answer is for me!

As Warren Buffett, the renowned investor says: ‘Rule No.1 – Never lose money.  Rule No.2 – Never forget Rule No.1.’

If you would like to learn more on how to address the cash flow issues in your business, then please go to www.adelemclay.com/free-resources and download my SPEARHead System™ – 50 Strategies For Supercharged Small Business Cash Flow.

 Could some guidance from me be helpful to you?  If so, please arrange a free 30 mins Skype strategy meeting with me.  Here’s my calendar to book a meeting.  I’d love to support you in some way to gain ‘seductive clarity’ in any aspect of your business or life.

Other articles on Small Business Cash Flow:

Small Business Cash Flow – The Ultimate Guide
Cash Flow Problems in YOUR Small Business
Small Business Cash Flow Problems
Cash Flow in Business
Cash Flow Projections – Important in Business?
Projected Cash Flow – Relevant in Business?
How to Solve Cash Flow Problems: Inventory Turn