The importance of cashflow

Last week they came back and asked if I could look at a cash flow for them as their bankers had requested one, to which the business owner exclaimed that it just ‘looked like figures to me’, which was a bit bemusing, as it appeared that they did not look at this regularly anyway.

I sat down with the business and we were able to extract an historical cash flow position and then looked to extrapolate that through the next 12 -24 months. On doing this, and asking various questions around their experience with their costs of materials/parts/labour etc, and the likely future impact of them raising their prices, we formed the opinion that if nothing changed their cash balances in 12 months’ time would be significantly worse off. Unless they raised prices by a small percentage.

Without doing this exercise, the business, who maintained they were doing well would have been in a serious cash shortfall position 12 months hence, unless they understood they're business more fully. With the current economic position of the UK seeing inflation at huger levels than at any other period in recent history, it is imperative that a business is on top of its finances.

The next step

If you need to discuss your finances in more detail then speak to your usual UHY automotive advisor, or find a member of our team here

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