I love to sing and am currently a member of a barbershop chorus, so I often pay more attention to the lyrics of songs than my friends and colleagues.
Parts of my life are often reflected in the lyrics of some of the songs I listen to.
For example, The Scientist by Coldplay is one such song that struck a chord recently.
It was playing while I was reading about the imminent rise in business rates and the impact of these, particularly on the hospitality sector in the north-east.
Though firms have had a 12-month reprieve following the cap on increases announced by the Scottish Government, there is an underlying theme which remains unchanged.
It is this – being in business brings many challenges, some of which are under your control and some that you just have to adapt to.
The Scientist’s chorus of “nobody said it was easy” seemed pretty apt for the ups and downs faced by many firms under changing circumstances.
But how can business owners deal with these challenges?
Firstly, there must be an awareness of such issues looming on the horizon and an understanding about what impact they will have.
Of course, this is easier said than done due to the pressures of day-to-day management.
And there is also the age-old problem of people spending most of their time working in rather than on their businesses.
But what if you don’t know something is coming down the line and have no chance to plan for it.
“What’s that coming over the hill, is it a monster?” from The Automatic’s hit track Monster?
From a financial perspective, I believe it is critical to understand the cash flow of your business.
Destiny’s Child had it about right with their 1999 song Bills, Bills, Bills.
Profits are subject to numerous accountancy matters which play a part in reporting financial performance but don’t have a direct impact on cash flow, such as capitalisation of fixed assets and depreciation.
But profits don’t pay the bills; cash does.
The gold star approach is to have a rolling 13-week cash flow forecast which gives you visibility on cash requirements for the near future, coupled with integrated financial projections covering at least the next 12 months for more strategic considerations.
The dunce’s cap award goes to a financial director I once met who brought up his online banking system and pointed to the “today’s balance” number on-screen and said that was his cash flow forecast.
Somewhere nearer the former and as far away as possible from the latter is where most well-run businesses are.
If that’s not you, then it is something that you will need to rectify. Jimmy Cliff put it best, when he sang “I can see clearly now the rain has gone; I can see all obstacles in my way.”
Neil Dempsey is the head of restructuring at Anderson Anderson and Brown.
Recommended for you
