What are the three main benefits of using cashflow planning software in your business? Well, let’s talk about what that is. Cashflow planning software is, if you’ve ever tried to manage your cash flows on a spreadsheet in your business, you realize that actually it’s probably manageable to a point, but then it gets really complicated. And then if you make a little mistake here or there it can throw the whole thing out.
So, cashflow management software was an alternative to managing your cashflows on a spreadsheet. And the idea is the cashflow management, we use float in our business. So definitely talk to me about that. But we use float and it connects up to zero and it does three things and we get it to do three things – it doesn’t automatically do three things. We get it to do three things.
First one is, it helps business owners understand what the long term impact of their current decisions. Like, a lot of business owners, they know what’s going to happen in two months time, three months time, even six months time, but they don’t know what’s going to happen in 36 months time.
Why is that important? Because sometimes you make a decision today and the impact of that might not necessarily be felt until about a year down the line. And if the impact of that it’s going to cause you to run out of money a year down the line, then being able to fix it today, rather than a year’s time when you run out of money, is incredibly valuable.
So it shows business owners as a first point, when they’re going to run out of money, if they are. The second thing it teaches shows them is when they’ve got too much money in a business sounds like a dream, right? Well, it’s not, it’s a problem because what it means is you’re not reinvesting the bit of the money in your business at a good, at a rate, which means you’re going to achieve the growth targets that you want. You might already be doing that and you might still have loads of money left over in your business. That’s a great problem to have, but then what that also means is you’re not extracting money from your business at the rate that is actually going to be then valuable to your own lifestyle.
So, by showing business owners whether they do have too much money, it helps them make better decisions about when and where to invest their money or how much to actually withdraw. So that’s the second thing that cashflow forecasting software really does. But the third thing, which I don’t think many accountants really talk about, is how it really helps business owners test their assumptions.
And I’ll tell you what I mean by test their assumptions. Okay. When we work with clients on this bit of software, we don’t look at zero as a starting point and say, hey, what happened last week? We taught our client, we build a cashflow plan from scratch. And by doing that, we, what we’re doing is we’re getting our clients to build something with us just by purely based on their expectations.
And their understanding about the business. And that’s really important because then the next month, when we start giving them reports about their cashflow, what happens is essentially the assumption our clients had, it is either proved right or wrong. And there’s so many instances where our clients think they know things about their business that aren’t actually the case.
And there’s other instances where they think they’re not paying for things which they’re paying for, or something’s gone up in price way more than it used to cost and they weren’t aware of it. And by actually giving business owners feedback on their assumptions about the business, it gives them a better understanding of where the business currently is and helps them make much better decisions.
So that’s the third benefit. I’ll just do a quick recap. Firstly, it helps people figure out when they’re going to run out of money by looking at the long term impact of their decisions. Secondly, it helps people figure out when they’ve got too much money so they can withdraw more or reinvest at the right time.
And then thirdly, helps really challenge a business owners assumptions about their business so they can make better decisions going forward. So if you want to find out a bit more about how cashflow planning can help your small business and help it really grow and scale, then we’re the people to talk to because we build the procedures to really get the most out of that planning software and you can do that by going to our website n accounting. co. uk booking a call there and checking out all of our other great content and I’ll see you in the next video.