The Hot Topic is Cash Flow Management or "How can I convince the Bank Manager that I am in control of my cash?"

We find that many of our clients would like to have more control over their cash flow. In fact poor cash management is one of the main reasons for corporate failure.

Part of the answer comes from better information. It is easy to see what you have in the bank account today but what about next week? Well that all depends on how quickly you can get your debtors to pay and how slowly you can pay your creditors.

Here are a few areas that you might focus on to improve your cashflow management and forecasting.

Relationship with Customers

These days, it is not uncommon to see the following clause in a company's terms and conditions: "All sums which are not paid by the customer on the due date (without prejudice to the rights of the supplier) shall bear interest from day to day at the same annual rate as is prescribed from time to time pursuant to section 6 of the Late Payment of Commercial Debts (Interest) Act 1998 with a minimum rate of 10% per annum".

Now rather than trying to understand what the legal eagles mean by this, wouldn't it be better to focus more closely on the relationship you have with your customer. We have seen good client relationships evaporate overnight because an insensitive credit controller chases a debt hard whereas in fact there is an issue with the service provided to the customer by the supplier.

Tips on improving customer relationships:

• Employ credit controllers who are good listeners - who can pick up the non-verbal communication (tone of voice, non-return of calls) even on the phone
• If you don't send out statements, send a copy of the invoice to the customer's accounts department at the same time that you send the original to the person buying your products or services - most accounts departments don't want their buyers to delay processing the invoices - it will only mean they get nasty phone calls from irate suppliers
• Find out the payment cycle from your customer's Accounts Payable department: if they only have one payment run on the 15th of each month, you can improve your cash flow by sending them your invoices in time to be included. This may mean you need to alter your invoicing routines for your largest customers, but it will be worth it when you start getting your cash receipts in sooner.

Cash Flow Forecasting

Do you use spreadsheets to do your cashflow forecasts? You might start with projecting your profit and loss account by month for the rest of the financial year. Then you might look at some of the amounts in the balance sheet - "How much will my creditors be in three months time?" From this your fundsflow and cashflow reports could emerge.

Have a look at www.cashflowwizard.com which offers you FOR FREE a forecast in Excel by answering 20 questions. The result is emailed to you and you have the option of purchasing an unrestricted copy of the plan that you have created.

Now this is relatively simple if you have one product / service, one brand and one company. If you have more than one of these, then cashflow projections can become complicated. Our recommendation is to play to the strengths of the software you use. When spreadsheets become too complicated with many nested equations and cross references to other sheets, then it is worth thinking about the more sophisticated pieces of software which take the uncertainty out of the maths - letting you focus on the numbers and what they mean.

We are happy to advise you on the choice of forecasting software and how it can link with your accounting system.

Debtor Days

How well are you collecting your debts compared to other companies in your sector? PriceWaterhouseCoopers have a devised a tool which compares debtor days by market sector. Follow this link and see how you compare: http://www.pwccredit.com/uk/cfr/rmg/dso.nsf/dsotoolbox?OpenForm

For example, in the sector that Infiniti Resources operates, Business and Management Consultancy, the median debtor days is 50 days. So despite our terms being 14 days from invoice date, we need to work very hard to keep at our own customer relationships!

Some Advice from Business Link

Nigel Lander, Adviser with Business Link for London, says on their website, "Turnover is ‘vanity’, profit is ‘sanity’ and cash is ‘reality’". Have a look at the Business Link for London website (www.businesslink4london.com) - there are some good tips and resources. It is a government sponsored support service for small to medium sized businesses. We have benefited from spending time with our adviser. Let us know if you would like us to introduce you.

And Finally

If you would like more information about cash flow management please call Peter Desmond on 0870 120 1128 or email: peter@infinitiresources.co.uk