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Getting Back to Business: Rolling Cash Flow

Every business has been impacted in some way by Covid-19. However, business owners must accept this changed environment and pivot to the new reality by moving forward to remain competitive, and stay in business.

To meet this challenge, it is imperative that business owners adopt a new philosophy for this current economic age, and this revival should include specific steps for planning and implementing modifications to past operational and financial activities. One of the most important objectives when a business reopens is to prioritize its goals.  

Therefore, regardless of your financial background, it is important to establish a method to record, monitor, and assess the continuing financial progress of your business so that you are regularly informed of its status. There are several basic business tools that are available and can be easily implemented to help prioritize a business’ financial activity. By categorizing each challenge and its threat to the survival of the business, the business owner can tactically address each issue in the order of necessity.   

One such tool is maintaining a daily cash management system, such as a Rolling Cash Flow schedule that can be created using Excel, that will permit an owner to benchmark and evaluate the cash inflows and outflows of the business, and then systematically allocate the forecasted future cash requirements.

There are three parts to this process, starting with tracking receipts and payments for several weeks of historical data. Next, perform a review of the activities for the current week, detailing all customer inflows, transfers, etc. and capturing all expenses. Equipped with this critical past and current financial information, the future cash flow needs of the business can be projected.

Thus, the company’s financial information will “roll” from one period to the next providing the business owner with the most available data, permitting a weekly trend analysis as to how the business is performing. At the end of each week, the business owner knows exactly what was spent, what was received and can forecast future receipts and disbursements. For the more ambitious owner, a sub-ledger worksheet can be maintained that details and prioritizes each transaction and can include such additional analysis as the anticipated due dates, minimum required payments, notes, etc.    

Business today will not be conducted as it had been in the past. Owners must reshape the way their business will operate and establish financial checkpoints to continuously monitor progress. There are many financial tools and techniques available for owners to gauge their company’s financial condition as they anticipate a return to their businesses. Implementing the Rolling Cash Flow is one method that should not be overlooked. 

If you would like additional information please contact your Gettry Marcus Advisor or Mark Warshavsky, the author of this article.

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