The previous posts have discussed the importance of preparing a budget as well as reconciliations.  Another reason why these are critical is that they also provide a basis to review the cash flow of your organisation.

We all know the importance of cash flow and the saying “cash is king” so reviewing the cash flow should also be done in conjunction with the reconciliation and budget process.

One of the outcomes of completing reconciliations is that it requires a review of the transactions linked to each account.  This provides an ideal opportunity to examine some transactions and the impact they have on the cash flow of the organisation.

For example, if some transactions are high and maybe over budget, is this because there has been an overspend?  Maybe it relates to a contract or it may even be as a result of poor internal controls.  Whatever the reason, this review provides you with an opportunity to identify changes that can be implemented.

If you have contracts for the provision of services that appear to be too high can they be renegotiated or consider whether there are cheaper alternatives available.  Perhaps have the service provided on a less regular basis.

If you have a number of debtors who are on, for example, 28 day terms, do they pay on time or are they late?   If the debtors are late on a regular basis then this can have an impact on your cash flow especially if you pay your accounts on time or even on shorter terms of trade such as 14 days.

Importantly, by understanding why the transactions occur and whether there is an over or under spend it allows you to review how they impact on the cash flow of the organisation so you can make changes.  Often only a few minor changes can make a significant difference but this highlights the value of review your cash flow.