The Importance of a Cash Flow Management Plan

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As accountants and bookkeepers, we have intimate knowledge of the challenges our clients face around their cash flow.

To emphasize this point, a study by US Bank found that 82% of businesses fail due to cash flow mismanagement. Most of our clients realize they need cash management help.

Many specifically request this service when they begin working with us. As is the case with many of our advisory attempts, though, there often seems to be a breakdown in communication when it comes to the practical implementation of a cash management plan.

Chances are this has happened to you: You’ve spent hours working on a cash flow projection for your client. The meeting to discuss the projection went really well. Your client was excited about finally not having to worry about their cash position and you both left the meeting feeling positive about the changes your client was going to make.

Then, three months later when you reviewed their books for your quarterly meeting, you discovered they had not followed the plan you outlined at all. What went wrong? How did your client go from being excited about the positive impact the plan was going to make on their business to not doing anything at all to implement it?

Cash Management Plans Must be Intuitive

In order for our clients to understand and follow through with a cash management plan, the plan must be intuitive. While projections and spreadsheets seem intuitive to us, most small business owners won’t take the time to consult these reports prior to making spending decisions.

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About Billie Anne Grigg

Billie Anne Grigg

Billie Anne is the Senior Strategic Guide at Profit First Professionals.


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Mar 7th 2018 13:06

Small businesses ownerswill encountermany challenges on the road to success, and cash flow management is one of them. Managing finances can get confusing, that’s why I have entrustedthis aspect of my business to the accountant I hired from Dua & Co. An open channel of communication between the client and the accountant can solve many issues. Thank you Billie for so explaining it well.

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