What is it that scares you the most? It probably boils down to not being able to pay your way, if you don’t have the ready cash to support your lifestyle then you might feel like your world will start to crumble. But just as bad as this is the prospect that cash flow might be so bad that you need to lay staff off.

If cash flow is the root cause of your biggest fears, what are you doing to understand this gremlin?

Accountants love talking about profit and loss and balance sheets but neither of these really get to the crux of managing cash. This is often why practice owners don’t want to pay these reports much interest because “they don’t tell me how much cash I really have”.

To me this means that you simply are not getting the right advice to translate the reports that you can get from your bookkeeping to give you a true view on the cash flow.

The problem

Cash flow is complicated. There are so many things that all need to be considered. From the big things like when the VAT is due, and when when the wages are to be paid,  to the smaller things like how long it takes for the card sales to appear in the practice account. There are also much harder things to manage like:

Staff Efficiency: are you maximising the work output of each member of the team to make sure that the cost of employment is maximising sales or are you employing two people to do the work that one person could do?

Stock Control: if you are holding more stock than you need to then you should think about how much money that ties up for the practice.  Having £30,000 of stock on the shelves might mean that you can get the meds that are needed to your clients quicker, but you are also taking the risk that they might go out of date before being sold. You are effectively investing cash, which can be used for any of the practices needs for a whole range of things, into something which might take months to turn back in to money, and some of that investment might never come back at all.  If you don’t know how much stock is on the shelves then you basically have an investment with an undetermined worth, and you are still buying more of that investment.

Profit problems: If the margins you are making on each consult and drug sale is not enough to support the overheads of the practice then there is only one direction that cash flow is heading.  Unfortunately by the time this hits the bank account it might mean that it is too late to turn around.  Only by reviewing the relevant bits of information in your bookkeeping can you get the early warning signs that you have a future cash flow problem.  Profit problems are just as likely to hit a practice that is expending, not just those that are contracting.

Cash Flow Radar

Long term planning: With some simple tools, which we offer to our clients for free, we can start to help you manage medium and long term cash flow.  Some of our clients now refuse to make major cash commitments without first reviewing our “Five minute Cash Flow”tool.  Knowing what you have now and what to expect on a broad scale over the next 12 months is the best starting point for cash flow planning.  You could be juggling cash flow each week or each day but if there is a bigger problem looming you need to be able to plan ahead for that just as much as planning for tomorrow’s PAYE payment.

Make sure you are doing the right things: We can also provide regular advice to make sure we can translate the bookkeeping into a cash flow planner and can help you or your practice admin team take control of the cash flow of the practice.  The quality of your bookkeeping and speed at which this data is available for analysis means it can help spot those potential issues much sooner.  We can help translate pages of numbers into some tailored and understandable cash flow reviews for you.  This will help make sure we can understand what is helping and what is hindering your cash flow as early as possible.

Weekly cash flow planning: One of the hardest things is getting on top of juggling the daily bank balance. When times are at their toughest, having a good person managing your bank account with an organised head to track and predict in and out flows of cash over the course of the next 2 weeks can often be the ultimate person who really does keep the unwanted wolves from the company doors. We can help you make sure that person is as equipped as can be to fight this battle.

Contact us for a chat to see what your biggest concerns are and see how we can help.

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