• BMIM Cash Flow

Financial planning - the key to securing certainty for your business



Who survives through a crisis? Those businesses that know how to address the first manifestation of crises, which is a cash shortage, whilst continuing to innovate to remain competitive.

In this blog I am going to talk about how financial planning during crises can set you up for business success in uncertainty:

  • Your weekly financial planning checklist

  • What to do if your cash flow is tight or if you have too much cash too soon

  • How to benefit from scenario analysis in your planning

  • How much cash reserves to set aside to be “safe”


Your weekly (or daily) checklist


Firstly, we must look reality in the eye. Cash is king! Cash flow is an integral part of your ability to operate a business. It is the lifeblood of any company. Hence, preserving cash for uncertain times is highly important. Having said that, it is not always easy to do it when you have bills to pay, payroll to meet and there it is the tax bill!


So what should you do?


#1 priority is to check your liquidity position.


See how long you can survive with your current liquidity in the “as it is” situation. A recent survey by the Canadian Government identified that 30% of businesses are unable to keep afloat for more than 30 days.

In order for you to get an accurate overview of your current liquidity, we suggest that you do 13-week cash flow projections – cash in and cash out. Make this rolling cash flow projection:

At the end of every week, re-forecast using the latest information and adapt your projection for the next 12 weeks, and then add another week.

Make this report available weekly (or daily in some cases), with a short explanation of why it has changed in the last week and chart it out against your accounts payable and accounts receivable. The real benefit of this is that you can learn so much about how cash flows through your business. It keeps cash top of your mind and the insight you get from this projection when you do it consistently week in and out, goes a long way in helping you determine which areas of your business you need to improve.


Next, look at the areas in your business that need improvements and get creative with the intention of boosting cash flow (earning more profitably or spending less, or improving your processes and systems for higher profitability). If you are lucky enough to have your working capital requirements sorted out, then you needn’t worry about improving your terms of trading. If not, however, then get busy renegotiating your terms with your suppliers and customers.


Next, assess how your liquidity situation is going to change as a result of actions A and B. Do some scenario analysis and see which configuration gives you the most favourable results.


Bear in mind that your prices are the first driver of your cash that will be affected by the crises. A lot of pressure will be put on your business to give special “crisis discounts” in order to remain competitive. Even though you won’t be able to avoid this fully, especially if your competitors are doing it, you can be smart about the way in which you offer better value for money.

One really powerful tactic to get around the “crisis discounts” issue is to unbundle your offering, by stripping it down to most of the basic offering. Choose the most basic features that still satisfy a need and price this “unbundle” cheaper. This way you can still meet the market demand for lower prices and maintain your profitability at the same time. You can still keep your customers and keep your profitability!



What if you have a spike in demand?


We have all witnessed that some businesses are doing really well during this crisis, especially food businesses, IT, healthcare, to name a few. How should financial planning differ for these businesses?


We have a client in the e-commerce business that is going through a growth spurt. The demand for their products has gone over the roof in the last 6 months! They have grown threefold since! Their issue hasn’t been cash flow shortage, but rather large chunks of money that although welcome, has created a feeling of overwhelming. They have been procrastinating on what they should do with the money, employ more people or save, or even invest.


The conversations I have been having with them have been around doing a little bit of all three.


  1. 13 –week rolling cash flow projections – make sure you implement this in your business, as you can really benefit from uncovering the improvements you will need to make to your business. Growth doesn’t mean you’ve got no improvement to make in your business. On the contrary, it will amplify the problems that the business had prior to the growth, so you will need to get serious about fixing these problems. One problem that immediately came to the surface with my client’s business was the lack of enough stock to fulfil the orders. They literally ran out of stock in some warehouses in the USA and Europe. The problem was that they didn’t have inventory management in place. They failed to plan well for this. So, another benefit that the 13-weeks rolling cash flow projections have brought into the business is the improved capability for financial planning for the newly emerged requirement to have a greater level of inventory to fulfil the greater demand. By incorporating their inventory projections into the cash flow projections they improved their capability for financial planning.

  2. On the employment side, they decided to employ more people to sell digitally. They recognised that some market places were under-leveraged and they knew that more focus on developing sales generated by these market places could bring in more revenue. Then, their question to me was - Bibi, can we afford to employ another person, and what is the maximum we should spend on this? Their operating cash flow at the time was 30,000, so I said yes, you can afford to employ someone, but there is a catch here… You’d want to check your sales productivity ratio first and see if you are currently getting your maximum productivity from every pound invested in sales. You should expect to get £6 back in contribution margin for every pound you spend on sales labour. This should determine if your current sales team is under-utilised, or they are overworked and you need to add more pounds to the sales labour pot.

  3. The next initiative we discussed was product development. As you know, if you are in the e-commerce business, you’d need to continue to add new products and if you want a quick result in sales, boost the performance of some of the “forgotten” products, those products you've been paying very little attention to recently and as a result, their sales have dropped significantly. When you invest in new products, you’d want to maximise their success. A measure of your success is how much return in pre-tax profit you are getting from each pound you spend on launching new products. You should be aiming for at least a 50% return on the money you spend on the launch. Financial planning really helps here, because first, you’d want to make sure you have the money to invest in the launch, and second, you’d want to assess if this investment is paying off, or if there are changes you’d need to make.


How can you prepare for the unexpected?


Financial planning is all about getting out ahead of it. What do we mean by this?


As a business, in crises or not, you should be prepared for what comes your way. Planning is an essential part of this preparation.


Since cash flow is the first victim of crises, you should plan for uncertainty by setting aside some cash reserves. How much depends on your business, but as a rule of thumb, you will need 3-6 months’ worth of operating expenses, plus your costs of direct labour set aside in cash, provided that you have cleared your debt or any line of credit you’ve got and are setting money aside for your corporation tax.


You’ve probably tried to organise your finances to help you survive and be prepared for any challenge that comes your way. But are you doing it the right way? Have you been really planning your financials in the most effective way to remain profitable despite all of the uncertainty that may come? Or maybe you haven’t even considered working on your financial planning.


Financial planning made easy


BMIM Cash Flow has an app made up of automated tools for measuring, improving and predicting your cash, profit and business value. Thanks to the power of cash flow analytics, these tools tell you if your cash flow performance is good and they show you where the cash flow “leakages” are. With this application, you can predict with certainty the effect any change or decision would have on your cash and profit. Additionally, you can track various cash flow improvement initiatives. Using such technology will show you what areas need improvement and how each decision will affect your finances even if you are not a financial person.




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BMIM Cash Flow is the finance business unit of BM Interim Management Ltd (BMIM), an interim and management consultancy based in London. BMIM is a team of Strategists and Implementers enabling businesses to operate efficiently and innovate creatively. We do this by designing and integrating customised programmes to fill in systems and talent gaps in your organisation. For the full list of services, visit the official website: 

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