727-530-0036 info@fma-cpa.com

Why cashflow planning is critical in 2018

Cashflow is simply the amount of money coming in versus going out.  Sounds simple right?

Sometimes it is not a matter of simply having more coming in than going out, but how the ebb and flow is structured and if there is a plan in place to assure that positive cashflow is consistent.


Cash is King

Without cash in, your business is basically a hobby. Your business needs cash to run. Expenses like rent, people who work for you, raw materials, supplies, and material you resell are required daily to keep the doors open. Positive cashflow means that everything is going well, and more money is coming in than going out. The higher the positive cashflow, the easier it is to grow your business with new equipment, more people or even added places you do business.


Cashflow Planning

However, to manage your cashflow you need a plan. Cashflow in most businesses is somewhat of a moving target. Some months, cash flow in can fluctuate while your cashflow out can remain static (rent, employees, etc.). Management of cashflow is critical so that you can predict fluctuations and maintain your ability to provide cashflow out.

Your company history can provide insight into seasonal fluctuations as can an intelligent review of expenses that are recurring and might be coming on the horizon.

These reviews can often uncover issues that can affect a business negatively. Annual licenses, rental agreements, inventory predictions, and capital equipment like computers and machinery often impact a business with “surprises”. However, these surprises could have been predicted with a thorough review.


Improving Cash Flow with Planning

A review of how billing is structured is often a place quick gains can be made. Are you losing money in collections or slow billing? Could you structure payment differently to ensure cashflow (especially for longer projects or long-term goals)?

Regarding cashflow out, if you have cash on hand, you may be able to benefit from discounts for full payments, or be able to use payment terms to their fullest. You want to pay all your bills on time and in full, but there are specific strategies to setting up and even negotiating terms based on your business goals, from setting yourself up for a large capital purchase to even selling a business.


Cashflow Planning is Critical

Today’s business can weather changing business environments, tax changes and seasonal sale cycles with a good plan. It is not just if your business has money coming in, it is specifically how you spend that money. A smart cashflow plan can help you develop protocol for your business that will help you understand what is going on in your business, your employees understand procedures on how they handle payments and operations and help the people you pay set expectations of how they work with you and creating a level of trust for your company.

Speaking to a qualified business advisor can help your business increase profits from a good cash flow plan.  Call us at (727) 530-0036 to schedule a time for a free strategy session to review your current plan.