UK: SME/Professional counsel - Keep track of your cash-flow.

UK: SME/Professional counsel - Keep track of your cash-flow. - Four documents to help you monitor your true financial position.

by Christine Corner.
Last Updated: 31 Aug 2010

Four documents to help you monitor your true financial position.

As your business grows, more and more of your time is probably taken up with marketing, dealing with suppliers and the strategic management of the company, not to mention the imminent requirements of millennium compliance and the introduction of the euro. It is important, however, to keep an eye on the financing of the company, to ensure that bills are sent out quickly, cash is received from customers, suppliers are paid on time and that the company is not overtrading.

The following financial documents should be prepared by your accountant and can form the basis for a financial review of your business each month:

Bank reconciliations showing the true cash-book position after all cheques are paid out and income is banked.

Cash-flow forecasts of expected cash inflows and outflows over the next month in detail. A summary of the movement over the next three or six months will provide an early warning to the owner of any major cash shortfalls or short-term financing requirements.

A listing of debtors and how longstanding their debts (or aged) will enable you to see whether there are any potential bad debts and gives you the opportunity to chase up any customers who are slipping behind in payment.

A listing of aged creditors will enable you to compare the rate of payment to suppliers with that of receipt from customers. The number of days' payment to suppliers should be less than that of receipt from customers.

From these basic financial documents (the last two are often prepared automatically during the computers' month-end routine), it is possible to ensure that the true financial position is identified and monitored, leaving time to concentrate on helping the business grow and develop.

Christine Corner is business services partner at Baker Tilly.

0171 413 5100.

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