Cashflow Management

Items to be checked would include:

• Does your client utilise a credit application form? Is it checked?
• Are directors’ guarantees received from directors of private companies that want to transact business with your client?
• Is consideration given to the Personal Property Securities Act (PPSA) and the potential benefits from registering various transactions on the Personal Property Securities Register (PPSR)?
• Is a letter sent to a new customer confirming the terms of trade?
• Does your client promptly issue invoices to their customers and implement follow-up procedures if payment is not made on the due date?
• Is an online debt management system being utilised which will generate reminder letters and SMS messages to encourage customers to pay their debts promptly?
• Is there a formal system to try to plan a debtors’ reduction strategy from one month to the next, to try to ensure an overall improvement in the debtors’ management system?

Some of the other areas that accountants could review, as part of the implementation of cashflow management advice for your clients as a major initiative as proposed by Mr Leeper, could include:

• Review of your client’s work in progress system – is it functioning satisfactorily? – are completed jobs being invoiced promptly when they are completed?
• If the business is holding stock for resale, has an appropriate stock system been implemented that assists in minimising the investment that the business needs to have in stock?
• If the business has stock stored at someone else’s premises, has consideration been given to registering that other business on the Personal Property Securities Register? (Click here – PPSR Due Diligence Review – Learn More)
• Does your client understand the “cashflow cycles” that apply to their business?
• What is the creditors’ days outstanding? How does this figure compare to the negotiated terms for payment with the business’ suppliers/creditors?

The key document is the “Procedure Control Form”:

• The package contains articles relative to cashflow management for you to read.
• The package includes forms to assist you to prepare a proposal and quotation for your client as well as an assignment control form to assist with the allocation of duties to team members.

The key documents to assist you in undertaking a professional assignment relative to cashflow management include:

• Work in Progress Review Questionnaire and article on Work in Progress
• Stock (Inventory) articles and review forms including:

• Stock Evaluation
• Stock Review – to assist in the conduct of a due diligence review on the business’ stock control system
• Stock Matrix

• Creditors’ Review - including calculation of creditors’ days outstanding and analysis of trading terms negotiated with individual suppliers and creditors.
• Debtors’ management is considered in detail in the separate Debtors’ Management Package (Click here – Debtors’ Management Package – Learn More)
• Bank Account – internal control systems to ensure that all bank accounts are being monitored and regularly reconciled.

Cashflow Management – will assist you to have a conversation with your client about improvements in the cashflow management within their business including articles on:

• Debtors’ Financing
• Export Financing Insurance Corporation (EFIC) role with exporters
• Debtors’ Insurance

Cashflow cycles relative to:

• Manufacturers
• Retail
• Professional Services

• And Key Performance Indicators and Ratios for Cashflow Management