This article appeared in the March 2003 issue of Real Business magazine

When times get tough, get your FD to give you these numbers, says Simon Walters.

King pin.

In just about any business, cash is king. So get a regular report – daily is best – of the company’s cash position (or overdraft level). These days your FD can probably dial into the bank’s computer to get the current balance; ask him also to show the cheques received from customers (but not yet banked), and cheques issued to suppliers but not yet charged against your bank account.

“I’m often surprised how many MDs don’t even know how to access their company’s bank account and its current balance,” says Philip Jacobson at accountants BDO Stoy Hayward.

What are you sitting on?

It’s all very well knowing your company’s cash position, even allowing for cheques recently mailed to creditors, but what about those unpaid bills that your accounts department hasn’t yet paid? Ask your FD for a list of creditors at least once a month, and compare it to last month’s total. Stretching your credit within reason is all very well, but if suppliers refuse to let you have more goods, it could bring your business to a grinding halt.

Show me the money.

Cash is the lifeblood of any business, and if you devote too much time and resources to gaining new business, you could overlook the collection of money owed to you. Ask the FD how often he sits down with the credit controller to review outstanding debts. How many customers have exceeded your normal terms of business? Is he taking appropriate action to collect those debts? And should you put errant customers on hold?

Spring cleaning.

Have a thorough and regular review of business practices. Ask the FD whether you should offer customers a discount for prompt payment. And on the other side of the coin, should you seek early-settlement reductions from your suppliers? Perhaps you should consider invoice discounting or factoring as a way of improving cash-flow? Does the FD think you should discard your lowest-margin customers or drop the worst-selling product lines to concentrate your resources on chasing better-value business.

I’m all tied up!

If you buy and sell goods, the chances are that you have a lot of money tied up in stock of finished goods or raw materials. Ask your FD to review your re-ordering procedures. Are you sitting on piles of rarely needed items? Could your suppliers reduce your minimum order size, or allow you to draw down smaller quantities, both of which would delay the need for you to tie up that all-important cash.

A cup of tea.

Why don’t you and the FD invite your bank manager round for a cup of tea? He’s more likely to be sympathetic to your future needs if you call him before he needs to call you. If your cash requirements are seasonal, ask him to flex an overdraft limit to your individual needs – there’s no need for the cost of a year-round facility if you only need it at peak times.

Your greatest asset?

A company’s most important asset is often its staff. They probably work hard and seem totally committed to the business. But ask your FD to take a dispassionate look at the staff roll – have some of them risen to salaries beyond what their jobs merit? Would you even hire them if you were starting the business afresh today? It can be a thankless job reviewing your colleagues as if they were mere objects, but someone has to… so get the FD to do it!

Simon Walters is a business journalist and full-time FD, who has many years’ experience of being nagged by MDs. Contact him on 07714 237523 or at: