Improving Cash Flow with Actionable Reports


Every business owner, CFO, CEO, or Company President knows the importance of cash flow when running a business. Regardless of the size of the company or the industry they work in, cash is king. 

Cash flow reports are considered one of the “Big 3” of the financial reporting world.  This status means, at least monthly, there should be a cash flow statement produced. More needs to happen though, just running the report isn’t enough. Those receiving the statement must have the knowledge and ability to understand it and make actionable recommendations. 

Making Actionable Decisions

As understanding of how to read and work from the cash flow report grows, executives will be in the best position to make positive changes to improve the financial health of their company. 

In a study performed by Harvard Business Review,  they learned that 86% of those questioned answered that it is very important to be able to have the ability to extract new value and insights from existing data and analytics. Your clients want to know how to read the reports you are giving them. 

Key Places to Make Improvements

Once your clients know how to use the data given to them in their cash flow report, they will want to put their knowledge into action! Here are the best places to start when cash flow needs a little help. 

Accounts Receivable

AR should be the first stop when working to diagnose cash flow issues within a company. There are three essential parts to any accounts receivable department. 

First, every time the company makes a sale, use the same process. A new sale is not the time for each salesperson to “do it how they always have in the past.” By having a standard sales process, time will be saved, there will be less confusion, and invoices will be sent out faster.   

Second, make receiving payments as simple as possible. The easier it is to pay, the faster payments will come in. With technology, these days, finding the most prudent way to get paid is out there. 

Lastly, it is dealing with delinquent accounts. Too often, companies have no plan in place for past-due or non-paying customers. This mistake will cut deeply into cash flow. Be bold and be flexible when it comes to asking for payment for services or products provided. 


Accounts Payable

Just about everything is negotiable in business; Including your accounts payable.  Review all the vendor contracts. During this review focus on two specific areas of the contracts.

First, make sure you are timing all payments correctly. Check on each due date and the grace period for each bill. Make sure you are not sending money out before your accounts receivable payments arrive. When working in an industry that requires the upfront purchase of materials, this can be especially important.  

Second, negotiate prices with vendors. Most vendors are more than willing to work to ensure that they get paid. Look to negotiate cost, payment due dates, pre-payment discounts, and bulk discounts.  

Spending and Costs

While analyzing company cash flow, start with these questions;

  1. Is this cost necessary? 
  2. Is there a better price available?
  3. Is there a more efficient way?

Keeping these questions in mind while looking over company spending, it becomes easier to figure out what can be eliminated, what can be less expensive, and what can be done better. These types of costs include food, entertainment, travel expenses, office supplies, etc. 

Apply these same questions to operating costs, and you may find savings on loan payments, bank fees, and maybe even rent costs. Possibly even lower the company COGS by being more efficient in production and purchasing raw materials at a better rate. 

Lastly, check inventory levels. Clearly, this depends on your industry type because not every business carries inventory. Carrying too much inventory can be a cash flow killer.

Final Thoughts

When a client begins to understand their cash flow statement, the become more empowered when making decisions for their company. Reach Reporting’s entire purpose is to bridge the gap between you and your clients. We do this by providing the easiest and least expensive way to build financial reports your clients will LOVE. 

Check us out with a demo or our 14-day free trial. 

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