Accounting Solutions update: A crucial time for cash flow management

Published: Thursday 11 November 2021

Good cash flow management is critical to running a successful business, now more than ever. In the last few months, we have seen significant wage inflation, increases in the cost of materials and consumables, as well as logistics and procurement issues, all of which has increased the cost base of most businesses. It is worth taking the time now to ensure your business is financially viable for a changing economic climate.

If as a business owner you have been operating your organisation as you always have done, you may very quickly start to feel the pinch if you do not take steps to adapt and plan for any extra costs that may come your way.

The BBC recently reported that wholesale gas prices are up by 250% since the start of January 2021, which is already impacting utility bills. Petrol prices are at a record high, inflation is predicted by the Bank of England to rise over 4%, and with the recent announcement of an increase in the minimum wage and a large hike in the corporation tax rate looming, it is essential to review and understand your working capital requirements going forward.

Our Accounting Solutions team have outlined a few key areas to consider below and have also provided two downloadable basic cash flow projection templates, created by our Corporate Finance team, to help support you in your planning.

Start with your business plan

A business plan, including a projection of your profit and loss account, balance sheet and cash flow, can help you to be prepared and ensure your business is still viable. Business viability is the ability of a business to generate profit or net income on an ongoing basis, year after year. Try to plan for at least six months in detail and include estimates for several years. It is a good idea to produce more than one version so that you can compare different outcomes, whilst remembering to be realistic - sales and income should be achievable, not a pipe dream.

Get your expenses in order

Evaluate what your breakeven sales need to be for the business to be profitable. Break down sales into each element and do the same for expenditure - this will help to identify which costs are recurring and which are ad hoc. Ensure to include all of your operating expenses (these are the essential expenses you need to incur to keep the business running) and factor in your own drawings. You should also include potential increases and run ‘what if’ scenarios to simulate possible outcomes. 

Understand and forecast your cashflow

It is important to understand your working capital requirements going forward, as they might not be the same as a year ago. You must be able to pay your bills while you wait to be paid. Is there a time lag between your provision of goods or services and getting paid? A cashflow provides details of actual cash required by your business on a day to day, month to month and year to year basis. Many cloud accounting packages will have built in tools that incorporate existing data into a forecast but this can equally be done using your own knowledge of the business and a spreadsheet.

Use your forecasts to make decisions

Your forecast may indicate the need to make some changes to maximise your cash position. Whilst you should always hope for the best, ensure you have a plan for the worst. Identify quiet or busy periods and review costs, cutting back on unnecessary expenditure. Look for ways to improve productivity and make efficiencies, whilst thinking about promotional activities.

A forecast may also highlight shortfalls that need to be bridged. If your plans do show a negative cashflow, ask yourself if this is temporary or long term? Identifying shortfalls early will give you the widest number of solutions possible.

Look for ways to speed up inflows and slow down outflows within reason. Bill regularly, chase debt and send out statements. Your customer may be trying to do the same, so get to know early warning signs and manage customer debt proactively, in order to limit your bad debt exposure and safeguard cashflow.

Remember, actual performance is likely to deviate from your projection, so if you update and flex your business plan and forecasts, you get more certainty.


You can download our cash flow projection templates here:

Click here for our short-term template

Click here for our long-term template


Hazlewoods Accounting Solutions team are here to support you with cash flow management and can help manage your accounting data using cloud accounting software, giving you the financial information you need to plan effectively. For further information or advice, please contact a member of the team on 01242 680000.

Content image: /uploads/team/unknown.jpg Rhiannon Hooper
Rhiannon Hooper
Associate Partner
View profile
Content image: /uploads/team/unknown.jpg Emma Boutcher
Emma Boutcher
View profile
Content image: /uploads/team/unknown.jpg Adam Shearing
Adam Shearing
Associate Director
View profile
Content image: /uploads/team/unknown.jpg Jennifer Harrison
Jennifer Harrison
Senior Manager
View profile
Content image: /uploads/team/unknown.jpg Kate Edginton
Kate Edginton
Associate Director
View profile