| Prudent Advice |
 |
|
| Inside Next Month's Issue |
| FYI: The January/ February issue will have new articles and will be printed out then. |
| |
| |
| |
|
Directors Message
It is half way through the year and pretty sure that employers will be getting into the swing of evaluating its’ employees performance and also company’s performance for the last 6 months.
It is wise to look back and evaluate and assess our personal and business performance for the last six months. Look at the experiences - good and bad - and write them down as another chapter of your life. Life teaches you a lot of things. For the relationships that have gone wrong and the blessings in life, they are all lessons to build your character and fill up the pages with meaning. Never hold grudges against people, it is a waste of time and it is a halt to the future you could build for yourself. Instead believe in the future you want to create and it will certainly eventuate.
Never cease exploring what life can bring you. Keep pushing the boundary and you will find many things you thought you would never discover. You will experience a sense of fulfillment and contentment that you will be grateful about. That is living. Step out of your comfort zone and live. For when the sudden land slides of life hit you, you may not be able to handle it.
But my advice to you is, stay in control, have a purpose or set goals in your life, live with discipline and respect your time, selflessly serve others and embrace the present. What you do unto others will be done unto you.
Have a great 6 months ahead of you and many blessings.
Mick Nades
Director
|
|
|
|
Readies Reckoner
Tony Alleeson offers a ten-step plan for assessing, managing and mproving
your organisation’s cash flow.
| 1. |
Always remember that it’s a shortage of cash (not profit) that kills businesses.
Many younger accountants, entrepreneurs And businesses will never before have experienced either a recession or serious cash constraints – and certainly not in an economy where customers, suppliers, competitors and even financiers and professional advisers are having similar difficulties. The adage “cash is king” barely conveys the importance of cash in these conditions: it is the oxygen that businesses require for survival. Many firms are gasping for breath even though the downturn is still in its early stages. Countless companies are starting to experience what are colloquially termed “cash flow problems” or a “cash crunch”. For them, cash management will be the key to survival. |
| |
| 2. |
Conduct a cash flow health check.
It’s often the lack of recognition of a cash crisis
or its magnitude that proves fatal. You must ascertain, therefore, whether your business is likely to face such a crisis and, if so, when it might strike, how long it might last and how serious it could be. Start with the monthly cash flow forecast for the next 12 months, the weekly forecast for the next 13 weeks and the daily forecast for the next 30 days. Use the best figures readily available and supplement them with further data and views from the board members and management. You can refine the analysis later and improve its accuracy. |
| |
| 3. |
Seek the full support of the board.
Your analysis will provide strong evidence of the extent of any cash management problems facing the business. This is the time to present your findings to the directors (including the non-executives) and secure their backing. The nature of the findings will influence the tone of your presentation: there’s no need to be a doom-monger, but don’t be afraid to give them a wake-up call if you think that they have been complacent. |
| |
| 4. |
Prepare a cash flow management plan.
There’s often a tendency to panic and start a series of (albeit individually worthwhile) disjointed actions without due consideration of their priority, timing and benefits. You’re planning for the short, medium and long term, so a more considered approach is needed. Start with a broad plan and break it into detailed actions for you and the board to delegate through the company. When the plan is drafted, discuss it with the board to check your proposals and seek further ideas. | | |
| 5. |
Implement a regime of daily and weekly cash flow reporting.
Report the bank balance to the board every day. Issue the following every Friday: A weekly cash flow forecast for the next 13 weeks. A daily cash flow forecast for the next 30 days (in graphical form). A report on the top 25 overdue debtors, including actions, responsibilities and schedules. A summary of key cash indicators, including debtor and creditor days. State your key assumptions on these reports and meet the board weekly to follow up actions. Introduce procedures for routinely gathering data from senior managers. Preparing a really useful cash flow forecast is an art, not a science. Always be prudent and avoid being either over-optimistic or wildly pessimistic. Then aim to achieve cash flows and bank balances slightly better than your forecasts. |
| |
| 6. |
Learn by your mistakes and never let yourself get overconfident.
Keep a chart comparing your four most recent 13-week cash flow forecasts. This will show whether you are consistently too optimistic or pessimistic. Similarly, show the previous week’s forecasts on the reports and charts you issue weekly example. |
| |
| 7. |
Create a cash generation plan – and make it
happen.
Firms that suffer a lack of cash are often sitting on a mountain of under-utilised “assets”. This is the time to review their cash-generating potential. How radical you are depends on the severity of the situation. A cash gain here is likely to mean a loss of profit or flexibility, so it requires careful judgment and debate with the board. The key is to generate cash to a schedule that’s relevant to your circumstances. So, for instance, you may need an extra £250,000 in three months’ time. Start with the full detail of fixed asset, debtor and inventory listings (having set a de minimis limit) and categories each asset for example: FR: fixed assets that can be refinanced.
FS: fixed assets that can be sold.
FN: fixed assets that cannot be translated into cash.
DP: debtors that will pay to normal terms.
DD: debtors in dispute.
DU: uncollectible debtors.
IS: inventory saleable in the normal course of business
IE: excess inventory of saleable lines.
IO: slow-moving and obsolete inventory.
There will be two options for some assets – for instance, debtors can also be collectively used for raising asset-based finance. Summarising this data, you should get an idea of the effects of potential courses of action. These could include refinancing fixed assets such as vehicles, buildings and IT equipment; raising finance on debtors using factoring; accelerating the settlement of lengthy commercial disputes, selling excess, slow moving and absolete stock at or below cost, or simply using assets to negotiate a new overdraft facility. Look at the big picture: are debtors, inventory or fixed assets your cash drain and are your trade creditors small compared with trade debtors? This may lead you to:
* Tighten your credit control procedures.
* Negotiate faster payments from key customers in return for price reductions.
* Negotiate slow payments to key suppliers and subcontractors in return for price increases. In better times you will remember those companies that helped you when they could. |
| |
|
| 8. |
Communicate effectively with your Stake holders.
There is no longer a stigma associated with admitting to having
cash flow problems. Communication is one of the most important aspects of cash flow management. You must consider carefully how and when to communicate with key stakeholders such as employees, shareholders, auditors, banks, customers, suppliers, subcontractors and credit insurers. Be realistic and give them the confidence that you have the situation under control. No one likes surprises – particularly banks and credit insurers – so be sure that the forecasts you may be asked to provide are bullet-proof. Communicate with the right frequency to ensure that any bad news you need to convey is imparted quickly enough. |
| |
|
| 9. |
Pay special attention to your suppliers and subcontractors.
The firms that supply your business’s goods and services are usually the first stakeholders to suffer the effects of its cash flow problems. Above all, they need honesty, clarity and certainty when dealing with you. They may well be prepared to accept a schedule of delayed payments for a period, but in return you must never break a commitment. Always return their calls. The greatest pressure from inside your organisation will be to pay those suppliers whose wares are needed now and those who shout the loudest, but you must also consider the welfare of the entire supply chain.
|
| |
|
| 10. |
Recognize when you need to seek help.
Don’t be afraid to ask for assistance. Cash flow management can be a tough and thankless task, which will increase your workload and stress levels. Although it will be at a time when your business can least afford it, you should consider either bringing in someone to cover your role while you concentrate on cash or hiring a specialist in cash flow management. Remember that, when you do eventually reach the end of the tunnel, you’ll not only be twice the person but also probably twice as employable.
Extracted from Financial Management - March 2009 |
|
| | | | | |
|
|
| IGH <> IGM <> P1 <> P2 <> P3 |
|
| Important Dates |
Christmas day
25th December 2008
Boxing Day
26th December 2008
New Year's Day
01st January 2009 |
|
| Daily Reflections |
| WHETHER WE ARE aware of it or not, whether we are in control of it or not, there is a first creation to every part of our lives. We are either the second creation
Extracted from Stephen Covey’s Daily Reflections for Highly Effective People |
|
