PONSONBY PROFESSIONALS
LOGAN GRANGER: CASH IS KING To our clients and all Ponsonby News readers, we wish you a healthy and prosperous 2021 and we look forward to working with you over the next 12 months as we embark on a year focused on business recovery, restructure, and contingency and continuity planning. For most of us seeing the end of 2020 was a joyous occasion worthy of a celebration like no other and we hope you celebrated in style surrounded by your loved ones. As we welcome in 2021, we first must reflect on the year that was; a year confronted by many challenges which have had an enormous impact on our business and personal lives. So what did we learn from this and how can we be better prepared for any future challenges? One of the first things we learn in ‘Accounting 101’ is the importance of cash flow. Cash is King. And that today is more relevant than ever. Poor cash flow planning was the most common issue we came across during 2020. Cash flow planning is best practice in any business and critical to survival and growth. Setting cash flow targets and regularly monitoring your actual cash flow against your forecast will enable you to predict large cash outflows and respond to changes in your business. Inadequate cash flow is a symptom of management problems in a business, NOT the cause. Helping our clients look ahead with confidence and putting in place basic cash flow maximisation strategies is core to our purpose as accountants. Why is Cash flow Management so important? • Assists with bank lending requirements • Identifies ways to avoid late payment penalties and interest from creditors • Improves communication and relationships with your financiers and suppliers • Gives you an understanding of cash and liquidity for better decision making • Helps you understand the key cash flow drivers and the cash conversion cycle in your business • Enables you to predict and plan for large cash outflows • Teaches you how to monitor your actual cash flow against forecast in your accounting or reporting software • Provides peace of mind that your cash flow needs are known and properly funded • Improves business processes that maximise cash flow, profit, and business value • Drives your business to achieve your goals in a controlled and managed way • Assists in tax planning • Encourages business growth, continuity and success
78 PONSONBY NEWS+ February 2021
Having your cash flow management sorted is one thing but does your business have a continuity plan? If you didn’t have one before March 2020, I am sure you have one now, or at the very least it has been added to your to-do list. Having a business continuity plan may not be high up your priority list, but its importance when disaster strikes, such as a global pandemic, is vital to whether your business sinks or swims. Having a plan in place improves the likelihood that your business will survive. Having a business continuity plan helps • build business resilience • outline the things you should consider now to minimise the impact on your business • maximise opportunities to preserve your cash flow and profitability • create a roadmap for dealing with employment issues and identify key staff • clarify a process for looking after your customers and preserving income from them • explore all options to pivot your business strategy in challenging times • identify worst-case scenarios and plan to minimise risk • preserve the value of your assets and your wealth • reassurance that you’ve done all you can to minimise risk CONTINUED ON PAGE 79
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