You have systems in place to manage and control cash flow
Cash is a very important factor when assessing the financial viability and strength of your business. Most well-managed businesses have dependable ways of monitoring cash flow and subsequent balances on a daily or even hourly basis. Senior managers should regard cash flow as a vital measure of performance
Key Issues
·         Business can be profitable and have good order books, but still fail due to a lack of the cash needed to fund operations
·         In the company accounts, cash balances are one of the few financial parameters that are absolute and difficult to manipulate.
·         Cash flow (the availability of funds) is the ‘life blood’ of a business and should be rigorously monitored and controlled by all managers
·         Both debtors and creditors should be controlled. Ensure that:
o      Suppliers are paid on time and
o      Customers know when payments are due and you know who is authorised to make these payments to you.
·         Ensure that all cheques and money received are paid promptly into your bank account
·         Actions that can be taken to manage and control cash include:
o      Including major expenditure items in the business plan
o      Adhering to rigorous budgeting and forecasting procedures
o      Giving managers limits on the levels of expenditure they can approve without further authorisation
o      Ensuring that goods are only ordered and received when needed
o      Paying suppliers strictly according to the agreed terms and conditions
o      Negotiating early payments from customers
o      Negotiating deferred payment terms for expensive items
o      Ensuring that invoices are sent promptly and are accurate
o      Improving the flow of materials to reduce factory lead-times, aspiring to receive payment from customers before having to pay suppliers
o      Finding ways to run the business on significantly lower levels of inventory
o      Leasing/renting capital equipment and other facilities where appropriate
o      Selling property, land and other assets with lease-back agreements
o      Adhering strictly to your contractual terms and product specifications to avoid any penalty payments and costly legal disputes
Factors for Success      
Factors to  Avoid
1.     You keep a close eye on cash balances
2.     You undertake regular risk assessments with plans for acquiring additional cash, if required
3.     You keep control of expenditure to planned and budgeted levels
4.     You make the reduction of working capital a key initiative for the business
1.     Finance directors taking decisions and not understanding their impact on the business
2.     Allowing uncontrolled expenditure
3.     Managers not being aware of the cash situation and its potential impact on the business
Who does this apply to?
Senior management teams
Realisable Benefits
A cash-positive business that is financially robust and secure


Factors affecting financial performanceFactors affecting financial performance

Factors affecting financial performance

Cash flowCash flow

Cash flow

Determining the cost of productionDetermining the cost of production

Determining the cost of production

Justifying the make versus buy decisionJustifying the make versus buy decision

Justifying the make versus buy decision

Justifying capital expenditure decisionsJustifying capital expenditure decisions

Justifying capital expenditure decisions

Managing debtorsManaging debtors

Managing debtors

Managing creditorsManaging creditors

Managing creditors



Providing management informationProviding management information

Providing management information