An acquaintance of mine recently told me she’d finally got on top of her finances.
“I’ve managed to save £15,000,” she said proudly. “I finally feel financially secure.”
Then she started talking about what that money was for.
A new boiler that desperately needed replacing.
Her daughter’s university accommodation.
Some expensive dental treatment she’d been putting off.
By the time she’d finished, it became clear that every pound of that £15,000 already had a job to do.
Suddenly, the balance in her bank account didn’t feel nearly so reassuring. It was giving her a false sense of security.
It struck me that businesses make exactly the same mistake.
Many business owners check their bank balance every day.
If there’s plenty of money sitting in the account, they assume the business is doing well.
If the balance is low, they worry.
But your bank balance, on its own, doesn’t tell you very much. It’s simply a snapshot of where you are today.
What really matters is what happens to that cash next.
In other words, your cash flow: what that money will be needed for tomorrow, next month and next quarter – and how much more cash is likely to come in before then.
Imagine your business has £350,000 sitting in the bank today. That sounds healthy enough.
But what if, over the next six weeks, you need to pay £180,000 in salaries, £65,000 in VAT, £95,000 to suppliers and £80,000 on equipment you’ve already committed to buying?
Suddenly, today’s £350,000 doesn’t look nearly so comfortable.
On the other hand, perhaps you’re expecting £275,000 from customers over the same period.
Now the picture changes again.
That’s why your bank balance, on its own, only tells part of the story.
Profit tells you how your business has been performing.
Cash tells you where you stand today.
Cash flow helps you understand where you’re heading next.
You need all three pieces of the puzzle to really understand your financial picture.
That’s what we provide at Insight Associates.
We make sure you understand how profitable your business really is.
We show you exactly where your cash position stands today.
And, perhaps most importantly, we help you see over the horizon.
Together, we forecast how your cash is likely to ebb and flow over the weeks and months ahead, so you can spot potential pressure points before they become problems – and opportunities before they pass you by.
That means you can plan with confidence, invest at the right time, manage your commitments and make better business decisions.
If you’d like to understand not just where your business stands today, but where it’s heading tomorrow, we’d love to talk.
At Insight Associates, we work with ambitious businesses turning over £1m+ to improve financial visibility, strengthen profitability and build robust cash flow forecasts that support sustainable growth.
Simply email garry@insightassociates.co.uk or call us on 01279 647 447 for a no-obligation conversation with myself or one of our specialists.
Warmly,
Garry
You might also like: https://insightassociates.co.uk/blogs/why-your-cashflow-forecast-is-usually-wrong
