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Learn To Spot Money Problems Before They Occur
Wed 23rd March 2011
Paperwork of this kind has proved extremely useful to businesses that want to get on top of their income and outgoings as they are very detailed. The information contained in the statements shows how much cash you have coming into your company and many other variables. These include the money that you've borrowed or are owed, interest paid, taxation and general outgoings.
Initially, it seems quite a simple task when it comes to managing your cash flow: don't spend more money than you have. But business is rarely straightforward and you might find that the income you are counting on - such as cash from clients thanks to services completed by your firm - is late, meaning you may face problems further down the line if this is not collected in good time. In fact, there are a number of danger signs that could highlight potential problems with your cash flow and it's worth bearing these in mind over the course of your trading period.
Use business plans
After cash flow statements, your written business plans ought to be another place to look when you want to ward off possible money issues. These will record your projected goals in detail and how you will reach them, which may include allocating resources, as well as information on your management team, along with financial data.
It's important to make sure these reflect the current workings of your company, so keep them up-to-date and use real figures rather than projections when you do this, as this will give you hard evidence concerning whether you are meeting the requirements of your business plan. If there is a discrepancy, it's essential that you investigate further and establish the cause, which could be down to a range of factors, such as seasonal variations.
Check market conditions
Sometimes the reason why your cash flow is being negatively affected is out of your control. But if you are dealing with unstable market conditions, it is still important to make sure this is identified and change your business plan or goals as necessary - in order to adapt. New competitors and products could see you battling a strong rival in the market to win customers. Or there may be small, but drastic, changes in interest rates and foreign exchange rates, which affect the financial climate you operate in.
Forge links with lenders
When interest and exchange rates alter the impact sweeps across the marketplace and this can introduce fear into lending practices, which may spark off recessions. In these uncertain times it's very important that you have built a good rapport with lenders and banks. Keeping regular cash flow statements means you have paperwork on hand to ease fears they have that you might not be able to meet payments, but sometimes trading is not that straightforward and you need to borrow to cover deficits.
In these situations its conducive to be very open about your intentions, but don't be afraid to get the best deal you can when borrowing money. Don't enter into financial arrangements that might be too much for your organisation to handle and perform checks on the firm you are borrowing from to ensure they are also not in financial trouble, or are offering you inflated rates.
Author is a freelance copywriter. For more information on finance for non financial managers london, please visit https://www.stl-training.co.uk
Original article appears here:
https://www.stl-training.co.uk/article-1539-learn-spot-money-problems-before-they-occur.html
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