Have you ever got to the end of a profitable month only to discover you’re short on cash? Don’t feel bad. Cash flow is so complex even top agencies sometimes need a temporary increase on their overdraft. There are 2 weapons in your financial arsenal to help you beat the dreaded cash flow slump – cash flow projection and debtors days.
First, Chase’s Cash Flow Projection in Dynamics NAV jumps out of the accrual system – receipts and payments based on invoice date – and highlights when you can expect to receive hard cash, based on your payment terms. It also shows when you’ll need to pay cash out and if you’ll run short of money before then. That way, you can make arrangements in advance and save yourself a lot of stress.
But it doesn’t matter what your cash flow projection states if the accounts team isn’t pressing your clients for payment. So secondly, you should always keep an eye on your debtors days. It’s a ratio that shows how quickly your accounts department is collecting receivables due. The longer they take, the greater the danger you’ll run out of money at a critical time.
Debtors Days is usually calculated annually with the following formula: Debtors Days = (Trade Debtors / Sales) x 365. For tighter control you can do the calculation quarterly or even monthly. There are several other methods of determining this ratio, so ask your accountant how best to go about it and what the optimal measure is for your business type.
The great news is that Chase’s Cash Flow Projection highlights outstanding cash collections. So you can quickly identify and resolve problems. Chase’s Cash Flow Projection is just one of the many business-critical features offered in the Chase Financial Dashboard. With this amazing management tool, you’ll always have the insights you need to take action and protect your financial position.
If you need more information about Chase’s Financial Dashboard (and Chase as a complete agency management solution), contacts us today.