CASHFLOW MANAGEMENT SERVICES IN NIGERIA
WHAT IS CASH FLOWS
Cash flow is the amount of cash or cash-equivalent which the company receives or gives out by the way of payment(s) to settle debt obligations. It captures the amount of cash coming into the business and amount flowing out. Cash flows can either be positive or negative. It is calculated by subtracting the cash balance at the beginning of a period which is also known as opening balance, from the cash balance at the end of the period (could be a month, quarter or a year) or the closing balance. If the difference is positive, it means you have more cash at the end of a given period. If the difference is negative it means that you have less amount of cash at the end of a given period when compared with the opening balance at the starting of a period.
At the most basic level, the ability of a company to create value for shareholders is determined by its ability to generate positive cash flows, or more specifically, maximize long-term free cash flows (FCF). However, the level of cash flow is not an ideal metric to analyze a company when making an investment decision, this is to say that because a company has positive cash flows doesn’t imply that such company is profitable. A Company’s balance sheet as well as income statements should be studied carefully to come to a conclusion.
Cash level might be increasing for a company because it might have disposed some of its assets, but that doesn’t mean the liquidity is improving. If the company has sold off some of its assets to pay off debt then this is a negative sign, calls for questioning and should be investigated further.
If the company is not reinvesting cash then this also calls for questioning, because in that case it is not taking advantages of opportunities to diversify or develop business for expansion and growth. Cash flow analysis is often utilized in analyzing the liquidity position of the company.
To analyze where the cash is coming from and going out, cash flow statements are prepared. It has three main categories – operating cash flow which includes day-to-day transactions, investing cash flow which includes transactions which are done for expansion purpose, and financing cash flow which include transactions relating to the amount of dividend paid out to stockholders.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flows from operating activities arise from the activities a business uses to produce net income. For example, operating cash flows include cash sources from sales and cash used to purchase inventory and to pay for operating expenses such as salaries and utilities. Operating cash flows also include cash flows from interest and dividend revenue interest expense, and income tax.
CASHFLOWS FROM INVESTING ACTIVITIES
Cash flows from investing activities are cash business transactions related to a business’ investments in long-term assets. They can usually be identified from changes in the Fixed Assets section of the long-term assets section of the balance sheet. Some examples of investing cash flows are payments for the purchase of land, buildings, equipment, and other investment assets and cash receipts from the sale of land, buildings, equipment, and other investment assets.
CASH FLOWS FROM FINANCING ACTIVITIES
Cash flows from financing activities are cash transactions related to the business raising money from debt or stock, or repaying that debt. They can be identified from changes in long-term liabilities and equity. Examples of financing cash flows include cash proceeds from issuance of debt instruments such as notes or bonds payable, cash proceeds from issuance of capital stock, cash payments for dividend distributions, principal repayment or redemption of notes or bonds payable, or purchase of treasury stock. Cash flows related to changes in equity can be identified on the Statement of Stockholder’s Equity, and cash flows related to long-term liabilities can be identified by changes in long-term liabilities on the balance sheet.
WHAT IS CASH FLOW MANAGEMENT
Cash flow management is the process of keeping track of the amount of money that comes into and goes out of the business. This makes estimating the amount of money that a company will have in the future. It also helps you determine how much money your business needs to cover debts, like paying staff and suppliers.
Cash flow is the term used to describe changes in how much money your business has from one point to another. Cash flow management is keeping track of this flow and analyzing any changes to it. This helps you spot trends, prepare for the future, and tackle any problems with your cash flow.
Cash flow management is very important, it ensures that your business has enough money to keep running.
The fundamental goal of cash flow management is to ensure that the incoming flow of funds is always greater than the outgoing so that the business derives surplus. Cash flow management also serves the secondary function of ensuring the surplus funds are wisely invested to generate optimum returns. Money or cash is the life wire of any business. When the cash stops circulating, all the critical operations can come to a halt, which could subsequently lead to liquidation of the business.
However, it is important to understand that cash flow is not the same with profits. A business may have positive cash flows and still be making loss. Cash flow management must be thought of as an intervening tool between payment to vendors or banks and receipt from customers. It seeks to seamlessly coordinate the payments and receipts in a manner that the payment to vendors is possible as per their credit terms after considering the payment cycle of customers.
The ultimate goal of cash flow management is to ensure that the business is not short of cash. A business must not delay payments to creditors after the repayment period. Likewise, it must not have long-standing debtors in its books. The emergence of such cases is a signal for the cash flow management professional to take charge. Business cardinal is a leading cash flow management services provider.
IMPORTANCE OF GOOD CASH FLOW MANAGEMENT
- SOLVENCY AND CREDIT WORTHINESS
Banks and financial institutions are interested in positive cash flow. A positive cash flow means the business enjoys steady and predictable cash flows. Banks prefer extending credit to such borrowers. The payment of the next installment is certain and reliable. Not to mention, the cash flow health also contributes to the credit score affixed on a company. Companies with an impressive credit rating will be in a better position to raise funds from the open market or seek foreign investment. It is noteworthy how mere management of cash at the operating level can be leveraged to fetch such huge benefits.
- ENABLING CAPEX AND INVESTMENT
The crux of a good cash management lies in maintaining positive cash flows over time. The theory advocates that the inflow should always exceed the outflow to have a surplus. Instead of keeping idle funds, they should be invested to reap returns, for example, they can be invested in projects with positive Net present values. This would be a classic case of “letting your money make money for you”.
- BOOSTS VENDOR AND EMPLOYEE RELATIONS
An efficient cash flow management system ensures funds are always at the disposal of the manager. By timing the receivable and payables perfectly, a business will always be in a position to honor the vendor obligations on time and not default. A business paying up on time is successful in building a relationship of trust with the vendor. It will also be possible to negotiate better credit terms with a satisfied vendor.
Additionally, an efficient cash flow management ensures timely disbursement of regular expenditure such as salaries. Regular salaries keep the employee morale high and they are less prone to leave the employer for better opportunities elsewhere.
More than anything else in their businesses, business owners stay on top of their cash flow, monitoring their cash flow statements monthly or even weekly to keep their eye on the pulse of their business. These critical numbers tell you just how much is coming in and how much is going out of your business. Making more than you’re spending? It’s all good. It is a very bad sign if you cash flow is always edging into red.
WHO WE ARE
Business Cardinal is a member of Matog Consulting Group with over 12 years of experience in providing cash flow management services in Nigeria. We have been providing excellent cash flow management services to various organizations in different sectors.
In the process of carrying out the cash flow management services, we assess cash inflow and outflow, provide cash flow analysis to assess a firm’s liquidity, as well as investment advice to customers to avoid tying up cash. We provide cash flow management services and strategies that strengthens the liquidity, investment and profitability of your firm
We conduct exceptional cash flow management services, in tune with the goal of creating values for shareholders and the overall objective of your organization. We also combine intelligent cash flow management techniques and our extensive market knowledge of operating, financing and investment activities to deliver an excellent cash flow management services as well as propose strategies to your firm to enable adequate cash performance.
Being one of the leading cash flow management services in Nigeria, we assist companies to carry out the best cash flow management services, generate results, suggest to them strategies that would help their cash flows perform efficiently and effectively and contribute substantially to good liquidity of firms.
We also develop close, effective and long-term working partnerships with clients to ensure full knowledge and understanding of their cash positions. With this approach combined with the proven expertise of our cash flow management services. We have over the years maintained strong and lasting relationships with our clients based on trust and delivery of business results that facilitates growth.
WHAT WE DO
At Business Cardinal, we perform the following functions:
- We monitor your cash flow regularly with accounting software and makes it simple to reconcile your accounts, generate reports and more.
- We focus on recurring monthly, quarterly or annual expenses. Help you cut back on utilities, rent or payroll.
- We help you cash in on assets when you have equipment you no longer use or inventory that’s becoming obsolete. We would assist you in selling it to generate quick cash.
- We help you get a business line of credit before you need one. A business line of credit is a good insurance policy against cash flow problems. You may be able to get a line of credit for a percentage of your accounts receivable or inventory if you use them as collateral
- We provide advice and procedures on leasing equipment instead of buying it. By leasing vehicles, computers and other business equipment, you get access to the latest features and avoid tying up cash, but you still get to expense the lease costs on your business taxes.
- We help you stay on top of invoicing. We help you design your invoices so they’re straightforward and easy to read, with key areas like due date, amount due, where to send payment and payment methods highlighted.
- We provide you with advice on delaying payments to your vendors. Unless there’s a worthwhile incentive for you to pay early, figure out how late you can pay your vendors without risking late fees or harming your relationship. This keeps the cash in your account and out of your vendor’s until it absolutely has to be there.
WHY YOU SHOULD HIRE US
Our experts and professionals with in-depth technical cash flow management knowledge and variety of industry experience and insights will help your business achieve efficiency and effectiveness by implementing appropriate cash management strategies. At Business Cardinal, we have accumulated experience of over 12 years by helping our clients manage these complex events.
- We ensure your information is secured in the cloud, so you can easily stay on top of your cash flow where ever you go
- We assist you in renegotiating the terms of outstanding loans or leases, so you don’t spend money on subscriptions or services you’re not using or insurance you no longer need.
- We provide advice on selling assets that is no longer in use or now obsolete.
- We provide you advice on how to delay payments within the permissible limit while still maintaining a good credit standing.
- We provide advice on leasing equipment instead of buying it. By leasing vehicles, computers and other business equipment, you get access to the latest features and avoid tying up cash, and you still get to expense the lease costs on your business taxes.
- We give advice on Speeding up payments by offering deals, consider offering your customers incentives, such as a percentage off the total, for early payments. Do the math beforehand to ensure the tradeoff (getting paid early) is worth the loss (less money in the long run).
- We advise you on how positive cash flow means the business enjoys steady and predictable cash flows and how the cash flow health also contributes to the credit score affixed on a company. Companies with an impressive credit rating will be in a better position to raise funds from the open market or seek foreign investment
- We advise companies to ask for deposits or partial payments on large orders or long-term contracts. Charging this way, the company generates enough cash to finance the materials and pay the workers needed for the job.
The importance of cash flow analysis and management cannot be overemphasized, a firm that does not effectively and efficiently manage its cash flows faces the risk of liquidation that is folding up in the long run. At business cardinal, we have performed various cash flow management services for different organizations/sectors/industries
Contact us for more enquiries on your cash flow management service on