By Leanne Revie
CFW Chartered Accountants and Business Advisers
AS the effects of Covid 19 unfold and impact our businesses, we know that cash flow is going to be more important than ever. We'll need to do business differently, especially when it comes to raising finance. If you're about to talk to your bank manager or approach a new lender to raise additional funds to help grow and sustain your business, it's vital that you do some preparation.
Lenders are not involved in your business on the day-to-day operational level. They will look at your business from a different view and will be taking a more strategic and longer-term perspective. You need to be able to provide lenders or investors with as clear a picture of the financial and operational future of the company as is possible.
In practical terms, this means drawing up a cash-flow forecast. Typically, the lender may also ask for up-to-date accounts and want to have sight of a business plan. A forecast takes different scenarios into account and shows how varying situations will affect cash flow. Remember that the lender wants to be reassured that their investment in the business will be safe, bring an expected return or be repaid at an agreed future date. If you have a well-prepared, robust plan for the business, that will go a long way to give the lender confidence in your ability to plan ahead in your company's future.
The cash-flow forecast shows how much money a business expects to receive and pay out over a period of time. It aims to predict cash moving in and out of the business and pinpoint seasonal fluctuations or potential trouble spots well in advance, giving you plenty of time to act. During periods of uncertainty and business growth, the cash-flow forecast is a beneficial tool for any size of business.
If preparing a cash-flow forecast seems a daunting task, your accountant can easily help you.