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Cash flow is king | The importance of accurate cash flow management for the holiday park industry

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Cash flow is king | The importance of accurate cash flow management for the holiday park industry

As any business owner or consultant will tell you, cash is king. It’s a recognised saying but what exactly does it mean and how can cash flow management help?

Whether you’re saving reserves to manage upcoming growth or juggling accounts to co-ordinate your cash, every finance department has to be fixated with looking after every penny, and making cash work hard and flow easily. Poor cash flow management is the primary reason for businesses failing; the key is to have enough cash coming in to meet the necessary expenditure on a month-by-month basis.  No new business can survive long without enough cash to meet its immediate needs. But if profit is up, why is cash flow so important?

Highlighting the importance of cash flow

According to Dun & Bradstreet, 90% of business failures are down to poor cash flow management.

The financial world of most conscientious small business owners is often sharply focused and revolves around their immediate obligations. This can lead to businesses being reactive rather than proactive regarding their cash flow management. They know that cash flow is the core of their business, and if they don’t have the cash available to pay their outgoings, they may not be able to open the next day. It is important to remember that some of the cash flow angst that these businesses experience, is the result of less than resourceful cash flow management.  A critical stage of any new business, is the first six months, this is the time when business fly or fail, and the reason, cash flow.

Firstly, a business must establish what margin they will make from their turnover, because the gross profit is the figure you should focus on. Secondly, you must make enough gross profit to cover your overheads. Inaccurate cash flow analysis, or not having enough cash to hand, can affect the day to day operations of your holiday park and can impact on your eligibility to receive additional investment. It’s vital to balance incoming cash and expenditure to maintain a reasonable balance of cash at all times, this is especially apparent for the holiday park industry due to the seasonality of custom. It is also vital to have reserves in order to meet unforeseen expenditure, for example unexpected maintenance in order to keep a pitch in a rentable condition.

In short, businesses go bust in the long term through lack of profit, but in the short term, they fail because they don’t have enough cash to pay their outgoings. With the right cash flow tools the minefield of income vs. expense can be navigated.

Managing your cash flow

The principles of good cash flow management are straightforward. First, you have got to make sure you’ve got more money coming in than going out. Money also needs to come in on time, so you can pay suppliers and invest in new assets/stock or further expansion.

Having access to cash also gives you better buying and negotiating power, which could save you money long-term.

Anticipating any shortfalls in funds, such as a downturn in demand during winter, is important too, as this allows you to make contingency cash flow plans such as extending credit.  Managing money and cash flow is critical for small firms – but if you can get the basics right, you’ll be in a strong position.

Technology supporting cash flow

An effective cash flow system will help you manage capital to cover operational costs and outgoings and help you foresee potential problems in the future.

Profit and loss statements and income statements can be used to determine projections for future cash flow trends of your business. These financial documents are instrumental in making cash flow projections. However, a cash flow statement serves an important and independent purpose – it accounts for non-cash items and expenses to adjust profit figures. Cash flow analysis statements display not only changes over time, but also available net cash.

Making cash flow projections and computing cash flow statements can be confusing if you have never managed these types of finances before, these are time consuming tasks for even the most experienced finance team. Microsoft Dynamics ERP can help you complete these monthly cash flow tasks, with Dynamics doing the analysis for you, you can measure your cash flow at any time with automated processes, allowing you to work smarter. Cash flows and your business grows.

Dynamics NAV and AX are ERP (Enterprise Resource Planning) solutions with integrated workflows to create new orders, schedule invoices, and export reports saving you time and minimising errors. Cash flow data can be shared readily and distributed to various departments to help monitor budgets, track project expenses, and run payroll. Importantly, your cash can be monitored, easily and precisely every step of the way.

ParkVision is an industry leading Park Management end to end solution, built on Microsoft Dynamics NAV, covering multiple business areas, delivering an environment that increases profit whilst removing the administrative overhead of running a business allowing park operators to work smarter:

·         Work smarter – Speed up processes; easily manage your park from sales to bookings and maintenance

·         Work smarter – Standardise tasks; use one fully-integrated system to run your business

·         Work smarter – Accurate and up to date reporting; compile a precise, instant overview of your business position

·         Work smarter – Prepare for cash flow peaks and troughs by forecasting; view real-time reporting and analysis

Equipped with the visibility, precision and insight financial management tools provide, your people can focus on today, tomorrow and your company’s future – not simply on getting through the end of the month or holiday park season.

A business’s cash flow is often cited as a key factor in its potential for long-term success. A company may have all the revenue in the world, but without the ability to generate cash, it can easily fail.

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