THIS week, Neil Kelly, Partner, Audit and Business Advisory at BDO Simpson Xavier continues the series of the expert comment views and urges that decisive action be taken for stronger management of businesses
“Our colleagues in BDO in the UK provided a rare piece of positive forecasting in the past week with the publication of their Business Trends report which suggested that short term and medium term business confidence had risen marginally for the first time in 13 months.
“Against this very marginal increase in business confidence, albeit off a low base companies acknowledged that the economy will continue to contract, however, it is clear that they are adapting their business models for the uncertain operating business climate that exists. Â
“On a more local footing it is clear that owner managers are taking swift and decisive action to manage their businesses more effectively. It remains critical that cash flows and cash management is the key focus for businesses. Feedback from previous articles highlighted a need for more emphasis on cash issues.
“Businesses must be clear on differentiating between profits, losses and cash. Cash is the real indicator of how the business is performing regardless of profitability in any period. With this in mind businesses should be looking at cash flow forecast and take a look out to where you will be in terms of cash in three months time.
“Another consideration is ensuring that efficient cash flow management is in place. Avoid tying up excessive cash resources in stock for resale or production. Closer monitoring of sales on a weekly basis should enable them to gauge stock levels required and the cash required to support this. Â
“One final recommendation for businesses is the need to manage debtors more effectively as it is an important safeguard against the effects of a prolonged economic slowdown. By taking such actions companies will show their reliance through decisive action and work towards emerging stronger as a result.
