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Q: My business is considered successful. We have a good reputation, sales are growing, and my accountant claims that business is profitable, but I have a permanent cash flow problem that causes a lot of stress and wasted time due to problems with our bank.
A: Cash flow problems and financial distress can be caused by many different variables; however, the major reasons for cash-flow problems in profitable businesses are:
• The Money is at Your Customers' Banks - weak collection capabilities and/or changes in the payment patterns of the customers (including an unexpected default by one or more customers, as an example of credit risk).
• The Money is "On the Shelf" - under-managed inventories and inventory procurement form the main difference between profits (on accrual basis) and cash flow from operating activities. When inventory procurements exceed sales in a certain period, the business is expected to generate negative cash flow in the next time period (regardless of the level of inventories at the end of that period, which is adjusted from the P & L according to accrual basis accounting principles).
• Absence of Cash flow Management – eventually, cash flow management is the only way to "feel the pulse" and identify cash shortages in advance (and potential exceeding of the approved credit limits). In many profitable businesses on an annual basis (based on accrual accounting method), extreme seasonality fluctuations may cause negative cash flow and financial distress during the year. In these kinds of businesses, cash flow management and the assurance of the corresponding credit resources are essential.
Q: I do have a cash flow report in my bookkeeping system - Why do I need an additional cash flow management software on top of my bookkeeping system if I already have a cash flow report?
A: In most bookkeeping systems the cash flow reports are afflicted with the following flaws:
• The output is not decision supporting and can not be used for financial planning. This relates both to the limited user interface and the absence of scenarios and "what if" analyses.
• The output is based on the initial settings of the bookkeeping system (especially with respect to the collection/payment projections of the open sales/purchasing documents) which in most cases have a remote correlation with reality. In addition, advanced/dynamic forecasting methodologies regarding the collection/payment of open sales/purchasing documents do not exist.
• The projection/output does not adjust cash flow oriented transactions that are recorded with historical due dates but for several reasons may effect the future cash flow (e.g., checks to vendors).
• The output does not consist of essential data elements that are required for cash flow forecasting and liquidity planning.
• There is no reconciliation mechanism between the future projected cash flow transactions (recurring & manual) and the actual future transactions from the general ledger.
• There is no reference to the credit lines and other credit facilities that are an important variable in the financial decision making process.
Q: Who operates your software for businesses that do have internal bookkeeping systems – the bookkeeper, the controller or the CEO (in most cases also the owner of the business)?
A: The CF Line software is a decision support tool, designated for the decision makers. The only role of your bookkeeper is to reasonably maintain your bookkeeping system (i.e., weekly bank reconciliations, internal reconciliations of the customers/vendors accounts, updating vendors' invoices/POs, etc.).
Having said the above, the main consideration of the CF Line is to minimize the user's time and knowledge input, with an emphasis on the automation of the cash flow forecasting process accordingly.
Q: Do I need to change our bookkeeping techniques in order to work with the CF Line for SAP Business One?
A: In Most cases the answer is No – our goal is to adjust our software tools to the different bookkeeping practices. As long as the bookkeeping system is reasonably maintained, you can work with the CF Line. In rare cases the general ledger should be amended in order to support special business practices.
Q: What level of bank account reconciliations do I need? How frequently does the SAP Business One DB need to be updated (especially with the purchasing documents and internal matches/reconciliations)?
A: The external bank statements need to be inserted/imported to the SAP Business One on a daily basis. The Bank reconciliations are expected to be on a weekly basis. We do not recommend customers reconciling their banks less than once-twice a month to work with the CF Line.
Internal matches of customers/vendors accounts are recommended on a monthly basis, though a higher frequency is useful.
Q: Can I use one of your software solutions if my bookkeeping is being maintained by an outsourced external bookkeeper?
A: Yes, CF Plus is designated for businesses that outsource their bookkeeping to external service providers. The CF Plus enables its users to manage their cash flow, collection process and payment to vendors.
Q: How complicated is it to operate the software? Are there any special requirements?
A: No, on the contrary. The CF Line is wizard oriented, so that even when an event of new accounts configuration occurs, the process is structured and very intuitive. In addition, there is a detailed manual, setup wizard presentation and a help desk for support.
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