Getting cashflow and financial projections right for 2018!

Getting cashflow and financial projections right for 2018

In the business world, cash is king. So, knowing where your cash is, or where it’s going is obviously hugely important. Cash flow issues are unfortunately hugely prominent, but you can make sure you stay out of the trap by following a few simple rules. Your cash flow forecasts future business needs which is why it is so important.

Create your financial plan

Having goals are great in any aspect, be it personal or professional. However, goals cannot be acted upon. Turn your goals into targets. This can be measured and aspired to as either a company objective or from your own perspective.

Having a well thought out financial plan not only helps you predict and estimate the future of the company, but it will also show shortfalls or where there may be problems in the future. Understanding and acting on potential problems is always preferable than doing nothing and being taken unawares.

Consider the history of your cash flow in recent years. What were you paying a supplier last year and use that as the starting point when determining the next years payments. All available data needs to be used when creating the plan.

Ask yourself when have cashflow issues arisen in the past that could be avoided in the future? What market forces are currently in play that may affect you in the short and long term. Forces such as Brexit are hugely important to consider. Have you thought of how Brexit is going to affect your company? Some won’t feel it at all whereas others may be drastically affected by it. There has been a lot of talk about building a hard border between the north and south of the country since Brexit has been confirmed, but especially in recent weeks. Will your business be affected by this? Possible tariffs that could be enforced or increased transport costs.

If your plan is to get 5 major customers on board, factor this in as well! If you have a proven track record of getting certain amounts of business on board per year, you can make safe (enough) assumptions about the following year. Consider the cost of winning this new business and ensure those costs get factored into your plan also.

Measuring your cash flow

There’s no time like the present in putting your projections for cash flow together for the next financial year. Being able to correctly predict estimations of cash flow is important so that you can in confidence make decisions regarding your business’ future. The main question to ask is where is our money coming from and when will we receive it.

Expect the best, plan for the worst

Never assume that debtors (customers, the people who owe you money for work done) will stay on a certain level year after year, or indeed, quarter after quarter. Many factors can come into play that may impact how quickly customers will pay.

This is when the saying ‘expect the best, plan for the worst’ comes into play. Preparation is key.

Deal with your Debtors early

Do you have an issue with customers not paying their invoices on time? There are several things you can do to improve this. Simple things like offering customers discounts if they pay their bills on time, asking for partial payment of the product or service at the beginning and agreeing terms in writing in advance.  Remember that the onus is on you to follow up with payments. Invoice individuals and companies immediately after whatever service has been carried out. Follow these up if they are not paid promptly. Using cloud accounting tools can really help with the invoicing process to ensure you can get invoices out quickly.

Be smart about your Creditors

Have a look at the terms and conditions of any supplier invoices. If you have 30 days to pay an invoice, don’t put yourself under undue financial stress. Consider your different deadlines and make a plan, this will enable you to make smart not rash decisions. Not having a plan and leaving it too late to pay will annoy suppliers and in a worst-case scenario they may decline to work with you in the future due to your high risk nature.

If you keep up a good relationship with your supplier, by paying within your time frame, they are more likely to be understanding if you have cashflow problems later on.

I mentioned about offering discounts for customers who pay early. Maybe some of the companies you buy from offer a discount as well. Take advantage of this if in the long run it is advantageous to you. If you really need the funds for that month, then hold out until the last payable day, but only do this as a last resort.


Depending on the type of person you are, you either love or hate a budget. Budgets help you keep on track of spending, income and the general day to day that could otherwise go overlooked. Depending on the size of your company put together daily, weekly, monthly and yearly budgets. Some departments would need all of these whereas other departments would only need a yearly budget. Did you know, in 2014, the Central Bank spent €55,000 on biscuits. Biscuits. That’s a lot of Jaffa Cakes. Seeing figures like this makes you realise the amount wasted in a regular office when a suitable budget is not put in place.

Cashflow issue?

If you find yourself with a cashflow problem, don’t panic. This is where having a suitable plan at the beginning of the year really comes into its own. Banks are more likely to trust you if you come to them before you need the money, not with your cap in hand.

The key is to make rational decisions and these are best done once everything is on paper. The first thing to satisfy yourself is if the issue is arising is really a cash flow issue or is there a business profitability issue.  While the former can result in the closure of a good business, the later has a business model issue and you are nly throwing good money after bad if those issues are not addressed. The key thing at this stage is to get good advice as you have a duty to all stakeholders to act in their best interest.

If we can assist you in any way in creating your financial plan for the next year, please contact us we’d love to help!