What use are cashflows and budgets to a bank manager

What use are cashflows and budgets to a bank manager. Bank managers don't know anything about accounts. They only deal with cash. Yet their decision could make or break a company. They decide or, as now in so many cases, someone higher up decides whether or not you can receive an overdraft or a loan. Bank Managers are not trained in accounts.

It takes a lot of time to prepare proper budgets and cashflows. I mean proper with backing figures for sales i.e. What products exactly will be selling and not just a "sales" amount hoping for the best amount. Or incrementing sales by 5% every year, where is that 5% going to come from?

As to what is the difference between cash flow and profit (profit is not cash) it is easy easy to show a profit (sales greater that costs), but it is not so easy to collect the cash and pay the suppliers, with paying suppliers sometimes happening before being paid by customers.

I hope bank managers understand this and you understand that you must provide information they understand and that you can back it up if questioned. Don't blame the bank manager for not getting a loan if you did not supply the information in a format they understand.

Most importantly, be realistic about your figures. Companies do not make a lot of money in the start up years, despite what the budget and the cash flow projections said.


www.nilssondenver.com
www.helpforbookkeepers.com