Beyond Interest Rates: The Hidden Costs of Poor Cashflow Planning for Businesses

Explore the critical need for effective cashflow management, the transformative benefits of modern planning solutions, and success stories of businesses transitioning from error-prone Excel sheets to advanced platforms.

Every pound lost due to inadequate cashflow planning isn’t just a financial setback—it’s a missed opportunity, a roadblock to growth, and a potential threat to your business’s survival. In today’s fiercely competitive world, where every decision counts, the stakes are high, and financial missteps can have significant consequences. However, by embracing short-term cashflow planning, businesses can navigate uncertainty with greater agility and foresight. There are practical solutions to managing cashflow that allow businesses to take charge of their financial destiny with confidence and clarity.

The Importance of Cashflow Management for Businesses with Revolving Credit Facilities (RCFs) 

Can your business afford to gamble with its financial stability? During a period of economic uncertainty, effective cashflow management isn’t just a luxury—it’s a lifeline. A revolving credit facility allows businesses to borrow large sums according to specific business needs. The credit available and interest rates payable vary depending on the loan agreement. RCFs offer convenient access to funds within set limits, aiding in bridging cashflow gaps, managing inventory, fostering business growth, and tackling unforeseen expenses. However, utilising an RCF also entails responsibilities such as paying interest on borrowed amounts and abiding by credit limits to avoid potential fees or penalties for missed repayments. Accurate cashflow management is crucial not only to reduce the need for RCFs but also to utilise them effectively. The facility is well used across many industries, but particularly in the construction sector.

Industry Insights: Cashflow Challenges and Solutions 

While RCFs offer flexibility and quick access to funds, poor cashflow management can exacerbate the risks associated with these financing options. According to the Office for National Statistics, the construction industry in Great Britain experienced a significant increase in recorded company insolvencies in 2022, partially attributed to errors in cashflow management. This underscores the critical importance of accurate financial planning to mitigate risks and ensure business stability, particularly for industries heavily reliant on RCFs.

The Benefits of Modern Planning Solutions for Cashflow Management 

Recognising the challenges and potential pitfalls of using Excel for cash flow planning, it’s crucial for organisations to seek out alternative solutions for managing their cashflow in real-time. Some large organisations run cash flow reports over quarterly cycles with reports plagued by user errors, input inaccuracies, not to mention the security concern of spreadsheets being shared across various company sites and departments for data input.

With standard templates, multiple users can seamlessly access and contribute to the data, fostering greater collaboration and efficiency. Granular analysis capabilities ensure access to detailed data insights, enabling businesses to make informed decisions at a site-level. The time savings are significant, benefiting regional teams as well as those responsible for compiling and analysing the data, ultimately allowing for more strategic allocation of resources and faster response times to market changes.

While RCFs are taken out for the group, the company may have numerous local bank accounts to pay or receive money, so it’s crucial to ensure that cash is available in the right accounts at the right times. Planning tools help facilitate easier collaboration, allowing local teams with close knowledge of cash flows, such as house exchange dates and land purchase dates, to make valuable contributions ensuring a more accurate picture for the entire company.

Case Studies: Success Stories of Transitioning to Planning Solutions 

Countless organisations have experienced the transformative power of planning solutions for cashflow management. One such example is Countryside Partnerships Plc., a construction company acquired by Vistry Group in 2022. Faced with project delays and financial setbacks stemming from Excel-based methods, they recognised the urgent need for change.

Seeking a more efficient and secure solution, Countryside turned to Anaplan.

With Anaplan’s implementation, they transitioned from error-prone Excel sheets to a standardised template accessible to authorised users. This streamlined their workflow and enabled real-time plot-by-plot analysis, empowering regional offices with quicker access to relevant data for informed decision-making. Subsidiaries could now input data in real-time, contributing to a live database on house and land sales that facilitated accurate forecasting.

The most significant impact? Countryside now had the capability to track land and house sales in real-time, enabling them to make informed decisions about when to draw funds from their revolving credit facilities (RCFs). By timing their RCF drawdowns strategically, they minimised interest rate charges, saving substantial amounts in the long run. With cashflow reports generated automatically based on site requirements, the burden of manual report generation was lifted, allowing their team to focus on strategic decision-making and cost-saving initiatives.

This success story serves as a testament to the transformative potential of planning solutions like Anaplan or IBM Planning Analytics in revolutionising cashflow management and driving business success.

Choosing the Right Planning Solution for Your Business 

When selecting a planning solution for cashflow management, consider factors such as scalability, integration capabilities, and user-friendliness. By aligning these criteria with your business requirements, you can choose a solution that addresses your current needs and lays the groundwork for future growth and prosperity.

Future-Proofing Your Cashflow Strategy 

In summary, the risks of relying solely on Excel and RCFs for cashflow management are evident, but so are the opportunities presented by modern planning solutions. By transitioning to advanced platforms like Anaplan and IBM Planning Analytics, organisations can fortify their cashflow strategies, mitigate risks, and unlock new frontiers of financial performance and stability.

About the Author

Rob Tindall is a skilled consultant with extensive industry experience and a deep understanding of analytical solutions. With a solid background in utilising tools like IBM Planning Analytics/TM1, Anaplan, SPSS, and other analytical platforms, Rob brings a diverse skill set to his consulting work.

Rob thrives on the versatility and complexity of his projects. Collaborating with clients across diverse sectors such as Insurance, Retail, Hospitality, and Finance, he has developed custom solutions to address a wide range of business challenges. From optimising budgeting and forecasting processes to enhancing product and customer profitability and streamlining workforce planning, Rob consistently delivers exceptional results.

Rob is also proficient in various programming languages, enabling him to seamlessly integrate solutions into clients’ existing systems. However, what truly sets him apart is his unwavering commitment to continuous learning. Rob approaches each project with genuine eagerness, constantly acquiring new skills and staying up-to-date with the latest advancements in the field.

With his extensive experience and exceptional expertise, Rob is widely recognised for his ability to provide outstanding solutions and invaluable consultative advice to clients. As a highly sought-after expert in the industry, he consistently surpasses expectations, helping organisations optimise their business performance through innovative solutions.