Questions That Your Accountant Should Be Asking You - Cash Flow

It has been said that Profit is an opinion, but cash (or lack thereof) is cold hard reality. Most companies go out of business because they run out of cash. Therefore, your Accountant should be asking you the following questions:

1. Do you have any Customers that have invoices that are more than 90 days past due?

If you do, you are putting extra stress on your company. The longer that an invoice remains unpaid, the less likely you will be able to collect it. The problem could be that your credit policy is too easy and that you are extending credit to companies that ultimately will not be able to pay you back. Perhaps, you are not being aggressive enough in trying to collect from people that owe you. In any event, your company simply cannot afford to have customers that don't pay.

2. Do you have any Vendors where you are 90 days past due?

If so, you are putting your company at risk. The best case would be that your suppliers will start refusing to extend credit to you. The worst case would be that your creditors might gang up on you and try to force you into Bankruptcy. In all probability, this problem is related to your inability to collect on your invoices.

3. Do you do Cash Flow projections?

Most cash problems do not happen overnight. By projecting your sources and uses of cash, you can anticipate problems and thus be able to solve or avoid cash flow problems that you can see coming down the road.

4. Do you use Budgets?

By taking time to plan expected cash outflows, you can avoid many unnecessary expenditures.
Budgets also make it easier to find possible Fraud when expenses are significantly higher than what was expected.

Your Accountant should be able to help you with these questions, so don't be afraid to ask.

Your company's bottom line will thank you.