Managing a business’ cash flows is a critical function of the finance team. The aim is to ensure that there is sufficient funds available at all the times to meet the likely needs of the business.

Cash flow management broadly falls into two halves – assessing the current cash flow situation and planning for the business’ future needs. Both of these aspects need to be done regularly and reported to the club’s governing body.

Assessing your current situation

Assessing your current situation requires a thorough examination of not only the cash moving through your tills but also the larger payments made to and from your bank accounts. Regular payments which should be examined will include:

  • Income from sales of products and services
  • Payments to regular suppliers,
  • Payroll for employees,
  • Utilities bills, insurances and other overheads, and
  • GST, PAYG, other taxes, and super.

What should be assessed is whether the income being received is sufficient to meet the costs or if there are any factors which may be impacting them at the moment like seasonality or renovations. If the income is not sufficient, you may need to consider options to increase revenues or reduce costs.

As a part of this assessment, you should also check the following:

  • Are there any outstanding debtors which need to be collected?
  • Are your stock levels appropriate to ensure you are not oversupplied possibly resulting in wastage?
  • Are you utilising the full payment terms offered by creditors, ensuring that bills are paid on time but not early?

Planning for the future

Knowing where a business’ cash flows are currently coming from and going to answers part of the question. It is important to assess whether there will be sufficient money available in the coming months and years to meet management’s objectives.

The key part of the plan is to prepare a cash flow forecast. This will include all the expected inflows and outflows of the business and calculate the expected closing balance for all your bank accounts each month. This is different to a budget as it should include items like capital expenditures and the repayment of any borrowings.

While preparing a cash flow forecast, it is important to consider:

  • Seasonality – historically, have certain inflows and outflows changed depending on the time of year or major holidays like Christmas or school holidays?
  • Renovations – have you included major capital expenditures like renovations, as well as adjusting for lower sales during construction?
  • Infrequent payments – have you included infrequent, and often large, payments both to be received and paid including to tax and gaming revenue bodies?

Once you’ve completed your forecast, you will be able to determine whether your expected cash flows will be sufficient to meet your cash at bank targets. This target should be level which management is comfortable to allow you to meet unexpected events.

If the target is not met in all months, there are a number of changes to business practise that you can consider. For example, calling in outstanding debts from people and groups which owe you money and informing them that in future debts will need to be paid sooner.

Once the cash flow forecast is set, it must regularly updated as part of your business’ good governance procedures. Through this and the regular assessment of the current cash situation, you can ensure your business is properly managing its cash to meet its your objectives.