by Aspect County

Controlling the finances

A profit and loss (P&L) statement, balance sheet and cashflow report are all statements most businesses will rely on for reporting of the finances. These statements fundamentally summarise the movement of cash flow, within the business from an historic point of view, eg previous months, preceeding quarter or the last financial year. Whilst it is clearly important that we understand where we have been, we can’t change the past. What is far more beneficial is to know and understand what the future may look like, predicting potential revenue in and costs out, and understanding where the pinch points are. 

By having a cashflow forecaster you can highlight where pinch points may occur and look at how to iron them out. You could look at extending terms with suppliers, ask for small regular deposits from customers rather than irregular hit and miss payments being made to keep the wheels turning. A sad demonstration of this is that around 80% of small business fail due to poor cashflow.

Budgets and P&L forecasts
These forecasts have historically been about cost saving, and to some degree this is still true. As a business you want to be profitable and as lean as possible, but by using the planning and forecasting method you can highlight your intentions, the reality of what then really happens, and then finally track the variance or the difference between the two. As always, the detail and knowledge that predicting and tracking gives you, allows you to then cut your cloth accordingly, to either trim further or invest more.

Sales budgets and forecasting allows the business owner to see what the opportunities and actions are required for the next quarter/year ahead. For some businesses this could be no more than an excel spreadsheet showing prospects that will close within each period and the expected sales figure that this would generate, for some this tool may need to be far more defined and scientific and may require the use of a CRM (customer relationship management) system to manage the amount of data.

If you would like to find out more about how you can effectively manage your finances within your business, contact​.uk quoting GCASP03 for a free no obligation 90-minute business review and coaching session.