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Help I’m running out of cash! How 2 things can help you cope with your worst business nightmares

Date: Tue, 21st Jan 2014
Posted by: Jan | Tagged: jan's blog, business performance, KPIs, forecasts

A client rang me a couple of weeks ago and said “I persistently seem to have no money, I need your help. Sales are up but I’ve got no money!”

I quickly asked about what I call my ‘three quick questions’ which provide a quick tool for analysis:


  • What are your stock and debtors levels like now compared to before?

  • Are you paying other businesses quicker?

  • Have you bought any large items of capital for use in the business recently?



I then discussed a comment he made earlier concerning prices: what are your margins on sales? He confirmed that they had dropped

I also asked whether he had increased spend on labour, marketing or on other overhead costs in running the business. I was advised that marketing spend had risen but everything else was static

I could quickly see that the Balance Sheet was under control but I wondered from the conversation whether the business was in fact losing money.

I next suggested he undertook the following actions to get a quick handle of the situation:

  1. Immediately run his profit and loss accounts from his bookkeeping software for the last few months and compare the costs to previous accounts -both in terms of actual spend and in terms of % of sales and then look at recent monthly trends

  2. Start measuring weekly the key numbers in the business, the KPIs, in this case – bank balance, sales, purchase costs, marketing & labour costs and compare these to year to date and prior year figures, both actual cost numbers and as a % of sales.

  3. Finally estimate fixed costs from past accounts, which shouldn’t vary significantly. From this a “Flash” result can quickly be obtained which if done well should be close to the actual result; “close” is enough for a Flash result. Now you know where you are right now!

  4. Finally prepare a forecast firstly for the next month and then for the next year for these KPIs and the rest of the fixed costs to give a target to measure against for Flash and actual management accounts results. Before preparing management accounts, at the end of each month an initial Flash result can be obtained for that month and compared to the forecast



By using KPIs and Flash forecasts combined with an understanding of their Balance Sheet, a business can quickly gain information as to how they are performing and take immediate action to control an adverse situation.

Why wait for management accounts to be prepared to know how you are doing?

Contact Jan on 07890 239442 to find out how we can help get quick control of your business performance


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