Cash flow forecasting should be an integral part of our business planning process.

It is vital to monitor actual performance against budget and calculate key performance indicators such as:

• Length of order book
• Sales compared with budget or last year
• Profit margins
• Stock levels and stock turnover
• Debtor days and overdue collections.

We have noted 7 bad practices that every business needs to avoid:

1. Taking on financial commitments before you can afford to pay for them.
2. Undertaking large amounts of speculative work in the hope of making a sale.
3. Overstating stock, WIP or fixed assets in your management accounts.
4. Not planning for major expenses you know will arise. .
5. Failing to prepare cash flow forecasts, particularly in today’s difficult market.
6. Failing to agree all the details of an order, leading to a customer dispute.
7. Poor credit control system, starting with credit checks before taking the order.

How do you score on these 7 bad practices?

Please telephone your main contact at Crowthers if you would like to discuss how we can help you to improve your business systems.

This entry was posted on Tuesday, November 8th, 2011 at 3:16 pm and is filed under Business News.