Here's how I manage my cashflow
When Peter Spivack and his three partners opened their restaurant, Rendezvous, in Wallasey Village, Merseyside in 2004, they knew sound cashflow management would be key to success during that crucial first year. As managing director, Peter assumed responsibility for cashflow management.
What I did
Set up systems
"I prepared my first year's cashflow forecast as part of my business plan, which helped me secure a start-up loan. I decided early on that I would review the forecast monthly, although I update the figures on a weekly basis to keep on top of things.
"I started off using Excel spreadsheets, but now I also use Sage accounting software. The software incorporates a range of reporting tools that let me present the information in whatever format I need. For example, I can see average spend per head at the touch of a button.
"I also had a marketing plan and budget from day one. That may not sound like managing cashflow, but it's actually crucial for keeping the cash flowing in."
Manage suppliers
"We arranged with key suppliers to be billed quarterly for the biggest costs. That makes budgeting and planning easier. We also negotiate 30-day accounts with suppliers wherever we can, which definitely helps cashflow.
"We're fortunate that our customers pay for goods and services at the time of purchase, but we still need to control outgoings. I'm always looking for ways to cut costs without affecting quality, such as switching suppliers if necessary and negotiating discounts on one-off purchases."
Use the forecast to spot problems
"It's no good having the figures if you don't actively use them. For example, we used to open at lunchtime seven days a week, as well as evenings. As business picked up, I was considering employing another chef to help us cope.
"I analysed the figures to see how much extra cash we were likely to collect, compared to the increased staff expenditure. I concluded that we would actually be better off keeping staffing levels the same, but only opening Tuesday to Saturday evenings.
"The forecast has also enabled me to spot looming cash imbalances on three occasions. I didn't panic because I could see the problem was only temporary. I used a pre-arranged overdraft facility to tide us over, confident that the money could be paid back the following month."
What I'd do differently
Get accounting software sooner
"Incorporating all the financial information in one place with accounting software has been a great help in managing cashflow and I wish I'd had it right from the start. It also makes it easier to prepare our end-of-year accounts and means I have up-to-date figures whenever I need them."