Helping SME clients understand the impact of cashflow

Pine trees and mountain

Poor cashflow is responsible for up to 90% of small business failures. As an accounting professional, you know why good cashflow is so vital to the survival of a business. But do your SME clients really have a handle on why cashflow is central to their ongoing financial success?

If cashflow is the lifeblood of a business, your role as a modern accounting adviser is to help keep clients fit, healthy and avoiding any potential cashflow health-scares. Helping them to understand the principles, tools and planning behind good cashflow is key to this goal.

So, we’ve outlined five key ways for your firm to help business clients get more proactive with their cashflow management – and, by doing so, improve their long-term business prospects.

1. Move to a modern cloud accounting platform

Accounting technology has been transformed over the past decade. Cloud is the new king and sluggish desktop accounting systems are no longer fit for purpose. To set the best possible foundations for managing cashflow, it’s vital to embrace the benefits of online accounting.

A cloud accounting software platform helps SMEs in a number of way:

  • Centralised data and numbers – all their important accounting data is recorded and stored in one place, with round-the-clock mobile access to these important numbers
  • Up-to-date bookkeeping – bookkeeping can be streamlined, or even totally automated using a tool like Receipt Bank, to keep their cash numbers up to date and current.
  • A growing choice of fintech apps – their core system can be easily expanded with a wide choice of third-party bookkeeping, payment, credit control and cashflow apps.
  • Better reporting and cashflow tracking – with custom apps connected to the client’s accounts, you have access to high-level financial reporting and tracking of cashflow.

2. Educate clients in the basics of cashflow management

Four in ten small business fail within five years, generally due to poor cashflow management. To help business owners understand cashflow more effectively, it’s important to teach them some of the financial basics – and set the right foundations for keeping their cash position positive.

A few key rules it’s important to explain to your SME clients will include:

  • Money in the bank doesn’t equal good cashflow – your bank balance only tells you how much cash the business has right now – it doesn’t keep you on top of cashflow
  • Cashflow is a process – cashflow isn’t a static figure: it’s the ongoing process of managing your finances to ensure there’s more money coming in than costs going out.
  • High profits don’t equal good cashflow – making a decent profit is good news for the business, but it doesn’t always ensure there’s positive cashflow to cover your expenses.

3. Use real-time numbers to track cashflow

A well-integrated cloud accounting system keeps you in control of cashflow, by delivering real-time financial reporting and giving your clients a totally current view of their cash position.

Having this prevailing financial overview means you get:

  • A real-time view of cashflow – so you always have the most current view of the cash pipeline, and don’t have to rely on out-of-date historic accounts and reporting.
  • Integrated cashflow apps – cashflow software apps connect directly to the online accounts, using this real-time data to track and measure cashflow and provide analysis.
  • Actionable cash analysis – based on the output from your up-to-the-minute cashflow analysis, you can quickly take action to overcome any cash issues or shortfalls.

4. Forecast SME’s cashflow to inform decision-making

It’s better to avoid client cashflow issues than to resolve them. If cashflow is the company’s lifeblood, it’s better for clients to take regular exercise, proactively monitor their health and project that data forward – allowing you to predict and prevent any ‘cashflow heart attacks’.

With forecasting tools in place, you get:

  • Clear projections of cashflow – the data in the accounting actuals is used to create clear and accurate forecasts – based on genuine historic cashflow performance.
  • Analysis that highlights any future issues – by processing the data from these forecasts, software can help to monitor and flag up any future cash-related issues.
  • Insights that drive preventative measures – with a future cashflow problem identified, action can be taken to change business direction, review strategy and improve cashflow

Fluidly allows you to create cashflow forecasts in seconds using Artificial Intelligence and existing data from cloud accounting software.

5. Offer proactive advice to improve income and reduce costs

Accountants are consistently seen as a business’s most trusted advisor – so build on this trusted position and bring clients the insight, direct advice and proactive strategies they need to improve their cashflow and remove some of the financial risk.

Here are some fundamental starting points for improving client’s cash position:

  • Reduce costs through careful cost management – help business clients to identify the potential for cost efficiencies, reducing expenditure and boosting cash levels.
  • Enhance the efficiency of their business model – review the basic drivers in their business model to improve revenues, increase prices and generate positive cashflow
  • Improve their late payment figures – look at enhancing their cash collection, payment options and credit control function, to make sure they’re paid on time, every time.

A proactive approach to cashflow advice

With the right education, tools and expert advice, businesses can greatly improve their cashflow position. And by positioning yourself as their valued business advisor, you and your firm can start improving the medium and long-term prospects of your business clients.

If you want the best in modern cloud-based cashflow analysis, Fluidly provides the software intelligence your firm needs to guide clients in tracking, monitoring and boosting their cashflow.

Find out how Fluidly improves your cashflow expertise.