Impact Cash

In all likelihood, the current recession will not end quickly or with a significant rebound. With retailers I spoke recently there is a feeling that the sales declines have stabilized for now, but there is no confidence that things will actually improve in near future.

Currently, many retailers are now in financial difficulties, and, at best, we expect a very tough start half of the year. Their immediate goal is to improve their cash flow. Many are faced with difficult decisions on reducing the wage bill. They are seasonal inventory liquidation, while deferring commitments in the second quarter as long as they can. They are uncertain about how to proceed with their marketing plans, whether to aggressively pursue new customers or focus on the achievement of their courses, customers proven.

Ultimately it is about cash flow. With positive cash flow, there is the promise of tomorrow and beyond. Without positive cash flow, there is only an abyss.

Currently, planning for cash flow is more important than ever. From my experience, even before the recession is only a small percentage of retail business to give sufficient attention to the planning of cash flows. For most, their attention does not go beyond keeping an eye on their bank account. That is not enough when times were better, but it is certainly not enough.

Like any other planning, be able to project your cash flow in the future you can establish benchmarks and up potential problems before it's on you. Projected cash flow gives you the opportunity to develop the broadest range of options to meet cash shortfalls, whether it is reducing expenditure, seeking additional capital, or sitting with your banker to discuss additional funding.

Currently, more than ever, you need a cash flow plan that looks to the future on a month by month rolling. One such project plan for all operations that will impact cash each month, including cash from the sale, and payment for the product, costs and taxes, as well as any funding stream or repayment obligations .

The projected ending cash balance for each month is the key to allowing you to where the pinch points may be. This is what you need. When you plan each month, at least six to twelve months before, as sure as the expected cash balance at the end of each month is enough to give you enough of a cushion to cover any surprises.

Once you have built a cash flow plan, put it to work. As each end of the month when you send the actual results and calculate your differences, be ready to go for a few surprises. You're likely to see differences that make you stop and wonder. As you notice significant differences, there are a number of things you're likely to find. Perhaps in hindsight the original plan did not make much sense. On the other hand, perhaps too much has been spent on repairs and maintenance, or payroll was a little heavy. Maybe something has been published in the correct account in error.

Having tracked the causes of gaps, and closed the leaks and operating characteristics of bookkeeping that you find, you also need to take what you have learned and adjust plans for the months ahead. Then take the actual cash balance at the end and roll it forward in the coming months, and review each month ending on projected future cash balance.

This is the critical step in detecting potential problems of cash flow as soon as possible. Your cash flow plan is a living document and must be constantly revised to reflect the latest information. This month gap between your planned and actual ending cash balance can not have an immediate impact on your cash flow, but when you roll forward, he can project your cash flow in the red (or dan.