Cash Flow Scorecard 9: How big are your savings?

Posted 09 August by Barb Easter in Accounting, Bookkeeping, Cash Flow, Entrepreneur, Small Business, Tools and Resources, Videos

Bookkeepers and accountants have long been advocates on the value of business savings…even when saving seems like an impossibility. Here’s a quick video segment with Barb and Blaine discussing how business savings can protect you against risky cash flow in more ways than the obvious.

Download Dryrun’s free PDF Cash Flow Scorecard to use for yourself and start the discussion with your clients.

Watch all 10 videos:

Cash Flow Scorecard 1: How do you get paid?

Cash Flow Scorecard 2: How big are your individual sales?

Cash Flow Scorecard 3: How often do you get paid late?

Cash Flow Scorecard 4: How large is your monthly budget?

Cash Flow Scorecard 5: How do you pay your largest expenses?

Cash Flow Scorecard 6: How often do you pay your bills past the due date?

Cash Flow Scorecard 7: How fast are you growing?

Cash Flow Scorecard 8: How do you fund expansion?

Cash Flow Scorecard 9: How big are your savings?

Cash Flow Scorecard 10: Have you ever missed paying yourself?

Video Transcription:

Hey everyone it’s Blaine and Barb with Dryrun and today we’re going to cover another one of our topics on our cashflow scorecard.

It helps you determine how at risk your business or your clients business may be for a cash flow crunch. Today Barb we’re going to talk about how big are your savings?

Barb: How big are your savings so this one’s pretty common sense that the larger your pool of savings the more insured you are against risk that may occur in your business, basically because you can throw money at it. Not only that, it puts you in an advantageous place for negotiations.

If you wouldn’t mind outlining the entire spectrum between no savings and how that puts you at risk, all the way to a good pool of savings that would be great, thanks.

Blaine: I know it seems self-explanatory if you don’t have any savings then you run out of cash, then you as the business owner is going to be cutting a cheque and moving money back into your business to keep it going, if you have it and if you don’t then now you’re in even more trouble.

So cash reserves they’re just essential for a business. It’s so comforting, it helps you sleep at night. If you have three months worth of expenses covered, sitting there in your bank account that is a nice benchmark to aim for, you know you have lots of wiggle room.

But I do want to reinforce that you do need reserves even if you have, you know, three months worth of cash sitting in the bank account make sure that you’re keeping track of things.

I know from my last business and I know we’ve talked about this before when the recession hit our business we got hit around 2009 that’s when the door slammed. It’s amazing how quick things turn around.

So if you’re not watching, if you’re not looking forward, if you have three months cash in the bank I would probably tend to do revenue forecasts and sales forecasts, put a lot of time into those. Keep track of your cash flow but you do need to make sure that you’ve got that money coming in.

If you’ve got to make 2 million bucks in a year you have to do that in 12 months not 14 because you can start to erode that money that you have in the bank quite quickly and suddenly one day you look at your cash is gone and you’re in a jam so it’s still very important to keep track of things but of course having cash in the bank is such a great safety net.

Barb: Thanks for expanding. I think I would just like to outline a couple points. So we can come back to in another video.

To ensure that savings that you put to your cash reserve is in fact a true surplus. So your not borrowing from the present moment to put it away and then have to pull it back out because that could be a false sense of security.

The other is working towards a kind of a rainy day project. What would be lean operations. So if your business is in trouble how can you stretch that three months out to be four or five if you have a good idea of how you might go ahead and scale back your operations slightly in ways that don’t affect your business, that still allow you to grow and to continue to move your business. I should say, maybe growth wouldn’t be possible at that moment so those two factors I think we should expand on another video.

Blaine: Yeah absolutely. Those are great ideas, those two topics are excellent ideas jot those down and we’ll do them.

Barb: While the videos is running today I’m just going to invite everybody that’s watching to download this risk factor scorecard for your cash flow.

It’s free on our website. You can even use it for your own business or for business that you work with, either as a one time benchmark or as a continual audit process. We think it’s very helpful to strengthening any type of business so that it can be cash flow healthy.

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