Cash Flow

Cash flow is, unfortunately, an art and not a science. The entire purpose of the Cash Flow module is to help you determine answers to: 
  • What is my average cash burn rate per month? (Average COS + Average OPEX)
  • How long can I last with my expenses as is?
  • What options do I have to improve my cash flow?


*At the risk of stating the obvious, with Cash Flow we want to make sure you have clear and unambiguous information to confirm that the amount of cash paid for delivering the product (Cost of sale - COS) and operating the business (Operating Expense - OPEX) is less than that collected from your customers! 

There are so many things that could or might happen that it is almost impossible to predict what will happen from one day to the next.



*Use the information in Cash Flow to ensure your actions and that of your team are generating enough cash for your business. If you believe your actions are enough, but cannot correlate witn your profitability, use the Company Health, and Spend Analysis tool to dive deeper into what is driving your profitability which in turn effects your Cash Flow. 

You can, however, get an indication of what might happen – based on historical averages and known data – and this is where the Funancial SMART's  Cash Flow module comes into play.






*IMPORTANT: If your bookkeeper does not update the accounting package on a daily or weekly basis, then Funancial SMART's usefulness will be severely limited!







*We recommend to visit the Cash Flow module every day to see how things are tracking  (and never less than once a week) This is the stuff that breaks companies!

General Income/Expense Adjustments for those "What if?" Scenarios

Before you start using the Cash Flow module to make decisions, it is important to highlight a core capability of this module to support income or cost adjustments to be taken into consideration in its cash flow forecast calculations. 

As a business leader/owner you may frequently face the question on whether you can afford a new cost for e.g.: 

  • A shiny new piece of hardware or new tools through which we can support or extend new offerings. 
  • A shiny new piece of equipment which enables the business to operate more efficiently
  • A software license purchase
  • A new property through which one can generate additional business

These type of questions generally happen in the context of: 

  • Do I have enough money to spend on this new thing?
  • Can I afford a capital outlay for a new investment?

To complicate matters, purchases can take the form of: 

  • Buy once on a fixed cost
  • Recurring periodically (monthly/quarterly/yearly)
  • Open-ended

Funancial has a built-in capability for you to SEPARATELY configure: 

  • Income Adjustments - Where for Cash Flow purposes we would take into consideration that income adjustment you are expecting against which spend analysis is performed. 
  • Expense Adjustments - Where for Cash Flow purposes we would take into consideration these additional spend items to the Taxes and other commitments which are registered within the system. 

*Nothing beats the company owners/leader's understanding of the business when it comes to making adjustments and decisions. Use this capability to help things straight if required.  

Sales likely to be invoiced

  • In accounting terms, you can only report on invoices that you have raised. 
  • This value is represented in the “Cash likely to come in” detail block.
  • Cash likely to come in is calculated in one of two main ways (as configured by you within the Company > Configuration). The options are to calculate cash likely to come in between: 
    • Average sales made which came in in the last three months
    • Average sales made which came in the last six months
    • Invoices due to be paid in the coming month (recurring invoices)






*Which mode to use will highly depend on your business. By default, we forecast based on average sales made which cam in the last three months. You can change this setting from the Company > Configuration. 






*For one-off-adjustments you can use the Income/Expense Adjustments which is accessible from the Detail panels in the Cash Flow Module. 

Using the cash flow module make decisions

The Cash Flow module is split into two main sections:
  • The left section answering the question: Do I have enough cash to survive THIS month?
  • The right section answering the question: Do I look like I will have enough cash to survive the COMING month? 

From a cash flow perspective, the bottom line in this module is all about working out that there is enough cash at the end of the month to perform all of the activities you had in mind to execute. 







*Remember that the output of this module is projected values depicting most likely outcomes based on the information we hold. Only you as business owner/leader would know whether the figures that are used or these calculations are close to reality or not. 

Do I have enough cash to survive this month?

  • If the Balance in the left chart (Cash Availability for This month) is positive (greater than 0) then the answer is probably yes. 
  • If the resulting balance is negative then you most likely do not have enough cash to survive the month i.e. you have more expenses than you have cash available together with anything you are collecting or adjusting for. If the resulting balance is negative do not panic just yet – we still need to validate the information and there may be some short-term actions that could save the day.
  • Use the “Cash flow decisions values” and “Cash flow – This month” or respective panel as a guide for your action plan:
  1. If the total for “Debtors - Overdue” plus “Cash likely to be spent?” is more than the negative amount in the second block:
    • Run a Debtors - Overdue report from within Funancial, and start chasing these clients for the money they owe you. Remember that you already did this work for them and that the reasonable time for payment has passed. They owe this to you and this will save the day. If needed get in the car and go fetch the money if you have to!
    • Start phoning clients that are due to pay you this month now! You can run a Report for Debtors - All and focus on the "Monitor" Section to see who owes you money this month. Confirm that they are going to pay their invoices this month. If they say no, start getting heavy-handed or butter them up as much as you can. Do everything possible to convince them that they really, really need to pay you this month.
  2. If the total for “Debtors - Overdue” plus “Cash likely to be spent??” is less than the negative balance in the Cash Availability chart, then you are going to have to…
    • make a decision on which payments to suppliers you are going to hold back on this month (tip – the government gets very nasty if you decide to not pay them so make sure you set aside anything that needs to be paid in terms of taxes first). You can use the Creditors - All report to identify who you owe money to and how overdue you are. It is probably a good idea to give them a heads up and let them know that you are not going to pay them on time. 
    • Whatever you do, try really hard to catch up on paying any outstanding amounts as soon as you can to avoid pesky court cases or longer-term cash flow repercussions. 
    • use the CompCompodule to find out if there are any cost of sales or operating expense increases that are getting out of hand.
  3. It’s time for an “All hands on deck” holler. Get everyone in your company working towards:
    • Completing any invoiceable work as quickly as possible
    • Selling more of your top 3 grossing products/services as quickly as possible (it goes without saying, once you have landed a sale, get it invoiced out as quickly as you can).
    • If you manage to turn to a positive balance keep on going! – don’t stop now!
  • You need to make sure that the same thing doesn’t happen next month so keep pushing on to collect money owed to you, as well as selling more of your top products until your balance is positive. Only at that point, you can relax slightly but keep in mind that you never, ever want to get to this situation again!

Do I have enough cash to survive the coming month?

As you did in the "Do I have enough cash to survive this month", the same operation and workflow can be done to start working ahead to ensure you have enough cash to operate in your coming month. 

In this case, you will rely more on the Average Income, and Average Spend fields to determine your actions, however, the same principles will apply. Make sure that your indicators show that you are tracking well at having enough sales to make enough profit to pay off your expenses. 

In preparation for the coming month push… it’s time to focus a bit of your attention on decisions that need to be made this month that will have a positive impact on next month’s cash flow: 

  • Check what your bookkeepers are mapping as income/expense amounts to be done the coming month. 
  • Remove anything that you don’t think you will invoice or incur as an expense the coming month. 
  • Find out from your staff if there is anything ad-hoc that they are working on that is likely to be invoiced this month, or likely to come in (Use the general adjustments to map out the what-if scenarios which may impact your cash flow analysis). 
  • Find out from your bookkeeper if there are invoices that should have been raised this month that were missed. If there are, make sure that they are raised now!
  • Put pressure on your sales team to close existing sales and land new business quickly so that cash flow continues coming in reliably.
  • If the “Average Income” is in significantly greater than the total of “What’s due to come in next month” plus the income adjustment above, then you need to put the pressure on your sales team to close existing sales and land new business quickly!
  • Once the business has been landed, you then need to put pressure on your service delivery/production team and make sure that all orders are filled and invoices out as quickly as possible.
  • Get everyone in your company working towards:
    1. Completing any invoiceable work as quickly as possible and make sure that the invoices are sent out as soon as the orders are completed.
    2. Selling more of your top 3 grossing products/services as quickly as possible (it goes without saying, once you have landed a sale, get it done and invoiced out as quickly as you can).

Cash flow is good so can I sit back and relax?

If both the Balance for Cash Availability for this month, as well as the Balance for Cash Availability for the coming month, is positive, then things will be appearing to be going well. We do however recommend not to relax just yet….
  • Use the “Cash Availability - This month" and "Cash Availability - Coming Month" to determine whether you are comfortable with the projections. 
  • Always remember to plan ahead and to follow our techniques to engage your teams based with data, so that they understand what you are facing as a team so that collectively you can react accordingly. 
If, after validating the figures you are confident that all will work out as planned, well done! Whatever you have been doing is working well for you so head over to the Company Health module to see how you can strengthen whatever it is you are doing.









*Don't forget to check the Cash Flow module on a regular basis to avoid any surprises in the future. We recommend you use it daily, however not any less frequently than weekly.  


Indicators Panel

Am I managing future cash in and out well enough?

  • If your "Cash in Bank" balance is low, you should probably start calling your customers to ask them to settle invoices as soon as possible and delaying payments to creditors. 
  • Use the “Cash likely to come in” for this month and “Cash likely to come in" for the coming month to get an idea of how much cash you could potentially get into your bank account in a shortish space of time.
  • If your Creditor Days is less than your Debtor Days, you are shelling money out faster than you are collecting it. Implement a process to delay your bill payments and a process to ensure that your customers settle invoices sooner.
  • If the Creditor Days value is red, you are paying creditors faster than the limit you set. Either change the limit or implement a process to delay bill payments.
  • If the Debtors Days value is red, the collection of money from your customers is slower than the limit you set. Either change the limit (from Configuration > Companies) or implement a process to ensure that customers settle invoices sooner.
  • If your Overdue Debtors value is high, get on the phone and make sure that these customers settle their invoices as soon as possible.
  • If your Overdue Creditors is high, you may not be managing your short-term debt well (this usually goes hand in hand with a cash flow issue). Frequently check in with your bookkeeper and confirm that these haven’t been paid. If the value is correct, you probably need to focus on generating more sales to your top 3 clients, negotiating better deals with your top 3 most expensive suppliers and / or managing your top 3 operating expense increases. Head over to the Company Health module to get the information you need.