Help your clients manage their cash flow with Microsoft Office Accounting
Right now clients are experiencing a severe downturn and everywhere they turn they are being exhorted to conserve cash or reminded of the old adage “Cash is King”. But few are well equipped to deal with the crisis. The truth is that most small clients find managing their cash flow a challenge. Unless they are market traders used to handling cash on a daily basis, the chances are that they will quickly lose sight of their current cash position let alone forecast balances in a month or three months time.
The difficulty is usually down to several factors, chiefly; confusion between profits and cash, high transaction volumes which make it impossible to track their position in their heads and a failure to quantify or take tax liabilities into account. So what can be done to help them?
Some will inevitably turn to spreadsheets to try to keep tabs on their cash position. But modelling cash receipts and payments can be notoriously difficult for the small businessman or woman. Debtor days can be a bit of a mystery for the uninitiated but even fewer will appreciate the subtleties of projecting receipts based on quotations, successful conversion (work won), orders placed and so on. Similarly, businesses quickly lose track of purchase order commitments, inbound purchase invoices and due dates for payments.
Building spreadsheet formulae that recognise the timing issues and correctly handle sales tax (VAT in the UK) in the process can present a severe test of competence in spreadsheet building as well as accounting principles. The result is that cash flow forecasting in a spreadsheet is beyond the grasp of most small businesses without a great deal of support from a knowledgeable accountant or bookeeper. Even if the small client is able to overcome the hazards of spreadsheet modelling, the sheer effort needed to manually maintain the model can quickly overwhelm even the most determined individual.
Yet it should be possible to derive a cash flow automatically from an accounting or business system and this is exactly the premise underpinning the Cash Flow forecasting capability in Microsoft Office Accounting Professional, (the functionality is not available in the free “Express” version of the software). In fact Cash flow forecasting enjoys a central position in the performance dashboard which is an indivisible part of the underlying accounting database.
