At times like this cash really is king and according to Business Link, not doing the basics such as a regular cash flow forecast increases the chance of business failure by 45%. 

Ten tips for financial health: 

1. Cash flow and financial planning should be on your management meeting agenda’s every time. 

2. Regularly update your cash flow forecast. 

3. If you have a conflict in choosing between increasing profits or increasing cash, take the cash route. 

4. Watch your borrowing covenants carefully so you know when/if you are likely to be in breech. 

5. If you have a review with your bank or investors, prepare thoroughly. 

6. Keep your bank informed in advance of getting into difficulty. 

7. Consider all alternative sources of finance. 

8. Keep in touch with potential funders before you think you might need them. 

9. If your business survival is under threat, think of assets that can be sold, new injections of cash and take professional financial and legal advice. 

10. If you are cash rich, consider ways of using the funds for the long term benefit of your business. 

You can read my personal blog at http://finance-director.blogspot.com/

 John Toppin at www.nomizon.co.uk 

 James Cooke at www.jamescookecoaching.com

According to Experian’s current late payment index, cash from your clients should be pouring into your business right now. Their figures are showing the biggest improvement in days in debtors since late 2007.

The south west comes out top with only 18 days beyond terms whilst in London things are not so good with settlement taking 27 days beyond terms. As far as sectors are concerned, the worst payers are in property with 39 days taken beyond terms on average. Remember terms are usually 30 days for many businesses so property is taking 69 days on AVERAGE according to Experian.

Have a look at the full survey at http://www.experian.co.uk/ and check the scores versus your clients to see how you are doing by sector. Remember to add your credit terms to the numbers in the survey!

As a consultant Finance Director specialising in creative, marketing and professional firms I suspect that you may see that your clients are performing worse than the survey is leading you to expect.

There are a number of reasons for this, but don’t lose heart, there is actually a great deal that you can do to improve the speed with which you can turn work done for clients into cash in your bank by improving your internal procedures.

Engage in the debate with financial management advisor John Toppin MA FCA and strategic advisor and business coach, James Cooke.

John Toppin is a specialist consultant finance director and ned for marketing,creative and professional firms.

You can check my credentials at http://www.linkedin.com/in/johntoppin

You can read my personal blog at http://finance-director.blogspot.com/

 John Toppin at www.nomizon.co.uk 

 James Cooke at www.jamescookecoaching.com

As you will be only too aware, cash flow forecasts are a vital tool for running your business - especially at times like these.

Sadly, many businesses are incompetent at producing cash flow forecasts - especially architects.

These are some reasons why your cash flow forecast might be rubbish: 

• Your cash flow forecast is based on your budgeted profit and loss account.
• Your cash flow is based on an inaccurate profit and loss forecast.
• Your cash flow is not based on movements in your balance sheet.
• You prepare the cash flow forecast monthly when you need to do it weekly.
• Your cash flow forecast does not show assumptions.
• You don’t check actual cash flow versus the forecast.

If your cash flow forecast ticks any of the above boxes then it can and should be revised - you will have a better grasp of your business and you should be able to identify areas to improve on.

For a little more on why good cash flows are important see my article in the September edition of RIBA Journal:

 http://www.ribajournal.com/index.php/feature/article/capital_gains_AUGSEPT09/ 

Engage in the debate with financial management advisor John Toppin MA FCA and strategic advisor and business coach, James Cooke.

John Toppin is a specialist consultant finance director and ned for marketing,creative and professional firms.

You can check my credentials at http://www.linkedin.com/in/johntoppin

You can read my personal blog at http://finance-director.blogspot.com/

 John Toppin at www.nomizon.co.uk 

 James Cooke at www.jamescookecoaching.com

Many practices are facing the need to rebalance costs with lower fees. There are some bear traps in approaching this exercise that you need to be aware of.

I have recently been advising a firm who had decided to make some selective redundancies by identifying staff that they had previously failed to manage out of the firm for poor performance. Leaving aside the legal rights and wrongs of this approach, the real problem was that the resultant savings would not have gone far enough. If this had been allowed to happen the “poor performer cull” would have had to be followed up in a few months by another round of redundancies - bad, bad, bad for morale.

What was really needed, and what is being done, is a proper look at how much money should be saved and from which parts of the firm. One round of redundancies rather than two is better for morale. Properly identifying activities that should be protected as well as those that can be cut helps to underwrite the firm’s future.

How is your firm approaching this difficult task?

For a little more on this see my article in the June edition of RIBA Journal:

 http://www.ribajournal.com/index.php/feature/article/balancing_act_JUNE09/

Engage in the debate with financial management advisor John Toppin MA FCA and strategic advisor and business coach, James Cooke.

John Toppin is a specialist consultant finance director and ned for marketing,creative and professional firms.

You can check my credentials at http://www.linkedin.com/in/johntoppin

You can read my personal blog at http://finance-director.blogspot.com/

 John Toppin at www.nomizon.co.uk 

 James Cooke at www.jamescookecoaching.com

In the current economic climate your cash flow should be a priority and you need to protect it for the benefit of you and your business.

Everyone seems to be holding onto their money for as long as possible and for creative SME’s who are often at the bottom of the food chain this can spell disaster especially as clients tend to be much larger businesses.

Here are a few tips for starters:

Prospective clients: Credit check them. Set credit limits and don’t increase them unless they have demonstrated that they are good payers.

Existing clients: If the time taken to pay has increased or if you have any other reasons to doubt their financial health, credit check your clients and act on the information. There are some classic signs of impending doom to look out for that you can monitor discretely.

Don’t be afraid to be as professional with collecting from clients as you are in your other dealings with them.

Understand your clients’ payment procedures and make sure you are in a strong position by having purchase orders, terms and conditions etc.

Sort out those who can’t pay from those who won’t pay and act accordingly – be realistic with the former and tough with the latter. Litigate if necessary – there are some very good debt recovery firms out there.

My view

I’m afraid many architectural practices are so afraid of offending clients that they will end up writing off fees because clients go bust…and then end up going bust themselves.

Are you going to let this happen to your firm?

Engage in the debate with financial management advisor John Toppin MA FCA and strategic advisor and business coach, James Cooke.

John Toppin is a specialist consultant finance director and ned for marketing,creative and professional firms.

You can check my credentials at http://www.linkedin.com/in/johntoppin

You can read my personal blog at http://finance-director.blogspot.com/

 John Toppin at www.nomizon.co.uk 

 James Cooke at www.jamescookecoaching.com 

I’m John Toppin MA FCA. You probably don’t know me from Adam so why should you read my blog and debate with me?

I started my business life as a Chartered Accountant in the midst of the early 1980’s recession (with Ernst & Young) and as Finance Director successfully steered people businesses, like yours, through the recession of the early 1990’s and the dot com bust.

As an exFD and CEO in marketing, creative and professional services businesses I have first hand experience of the issues you face.

Since 2005 I have been providing financial management consultancy exclusively to owner managed creative and professional services firms, including architects, though my firm www.nomizon.co.uk.

Many of you will not remember the last recession, or the one before that and most of you will not have been running businesses at that time.  

This recession is shaping up to be the worst in living memory and the IMF says that it will be the worst for 60 years with the UK being the last major economy to emerge.

Don’t expect things to start to improve any time soon.

Architectural practices are particularly badly affected, as you will be only too aware and this recession brings with it some new realities you will need to face up to.

Your firm’s profits are or will be squeezed or turned into losses as contracts dry up and/or new work is won with lower value bids. Cash flow is tightening as clients spin out payments coupled with the double whammy of your bank being less than supportive to you in your hour of need. 

If you are a partner or owner, the value of your equity in the business has fallen (or will fall) because of lower profitability, increased uncertainty and lower multiples. If you were thinking of selling your stake and retiring, you may need to think again. 

The value of your investments, your house and your pension fund will also have fallen over recent months. Interest income and annuity rates are at an all time low. Many fear for their job security. 

As individuals, our ability to influence events is limited and of all these new realities, the one you have most influence over, if you are a partner or owner is the running of your practice. 

Steering a business through these times is very different to running a business during booming or more benign times.  

Do you agree that the one thing you can control is your business and what will you do differently over the next quarter and the one after that to make sure your firm survives? 

Engage in the debate with financial management advisor John Toppin MA FCA and strategic advisor and business coach, James Cooke.

John Toppin is a specialist consultant finance director and ned for marketing,creative and professional firms.

You can check my credentials at http://www.linkedin.com/in/johntoppin

You can read my personal blog at http://finance-director.blogspot.com/

 John Toppin at www.nomizon.co.uk 

 James Cooke at www.jamescookecoaching.com