Cashflow Management

“There is a market for accountants to offer cashflow management advice”.

About This Product

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  • Cashflow management advice is one of the most important functions that an accountant can offer small/medium enterprises, most of whom do not employ a qualified accountant to assist them in the management of stock, debtors, work in progress, creditors and their bank account.
  • This is an area with which that most small/medium enterprise businesses need assistance.

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Product Content

The Cashflow Management Product incorporates commentary on the following areas:

  • This is an area with which that most small/medium enterprise businesses need assistance.
  • Stock Systems
  • Debtors’ Management (available in a separate package)
  • SME Debtors’ System Manual (available in a separate package)
  • Creditors
  • Cashflow Management Overview
  • Debtors’ Discounting and Factoring
  • Debtors’ Insurance
  • Cashflow Cycle Charts
  • Key Performance Indicators – Ratios for Cashflow

Want To Know More?

“There is a Market for Accountants to Offer Cashflow Management Advice”

At the Australian Technology Showcase for Accountants (ATSA) Conference in October 2014, the Second Commissioner of the Australian Taxation Office, Geoff Leeper made this statement – “there’s a market for accountants to offer cashflow management advice”.

What did Mr Leeper mean in this comment?  After all, he made this comment as part of his overview of the effect of the introduction of Standard Business Reporting (SBR) by the ATO.  Mr Leeper indicated at that conference that the ATO had guaranteed the Productivity Commission a “red tape reduction” of, at least, $500 million per annum from the SBR process.

This is a substantial amount of money that Mr Leeper indicated that accountants could replace in their fee mix with cashflow management advice.  What’s included?Debtors are a huge problem for a large number of small businesses in Australia.  Unfortunately, Australia has the dubious title of having the “longest debtors’ days outstanding in the world”.  This “award” was bestowed on Australia following a review of debtors’ days outstanding in over 80 countries by a UK organisation.  This international review indicated that Australia’s debtors’ days outstanding was 56.4 days.  This means that many small/medium enterprises have debtors’ days outstanding for more than 90 or 100 days.There is a potential opportunity for accounting firms to conduct debtors’ reviews for your small/medium enterprise clients, to see what improvements can be made in the debtors’ days’ outstanding figure.

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?

These are some of the issues that accountants could implement to fulfil Mr Leeper’s prediction that accountants could earn substantial fees from cashflow advice to replace the fees that the Australian Taxation Office is very confident accountants are going to lose from the ongoing changes being implemented by the ATO.

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

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