Whenever there is a downturn in the economy or business in general for whatever reason and not Pandemic specific or exclusive those commentators who are struggling to find traction for their products for obvious reasons revert to the clarion call of Cash Flows.
Nothing whatsoever wrong in preparing cash flow forecasts and they are undoubtedly very useful but every business is different and every business has its strengths and weaknesses and maybe those businesses don’t have the ability to prepare a worthwhile forecast but when you talk with them they have detailed knowledge of their business down to debts for and against, bank balances or overdraft levels, orders on the go and future orders. Those in retail have knowledge of stock levels, takings trends, staff levels, I could go on.
At small business levels the owners/managers basically live the business and frankly thy understand the value of £1 and they make sure that every £1 spent especially when times are hard is a £1 well spent and if for them the time spent preparing, reviewing and most importantly re-vamping a cash flow forecast is a £1 wasted should they be decried?
Many believe the bond between an Accountant and a client is cemented by hours spent pouring over spreadsheets especially forecasts when the reality is usually the opposite as quality time is spend actually talking with clients about the business and only using spreadsheets if the client actually grasps their significance and truly understands them and is prepared to pay for them as well.
Many of us have seen forecasts that are frankly cringeworthy in that they are built on over optimism on a breathtaking scale and bear no relation to the real world. We’ve seen those that simply don’t add up, we’ve seen those that if they go across a page suddenly have a completely changed layout and we’ve even seen those that by mistake purport to be in a foreign currency.
This is what can happen when forecasts are prepared by those that don’t have the necessary skills and begrudge spending money employing those that have. Now of course we have the joy of the automated forecast coming directly from software which usually has the virtue that it adds up as a minimum.
Businesses will fail and some will not and having a cash flow forecast will not be the main reason, probably it will not even be the second or third or fourth reason and not having one does not make you a bad businessman and having one does not make you a good one BUT if you do have one make sure it’s a good one.