Business advice from Coldplay?

I love to sing, and am a member of a barbershop chorus. That means that I often pay more attention to the lyrics of songs than my friends and colleagues, and I find areas of my life being represented in the lyrics of songs that I’ve heard. “The Scientist” by Coldplay is one such song that struck a chord recently, when it started playing whilst I was reading about the imminent rise in business rates (non-domestic rates) and the impact of these particularly on the hospitality sector in the North East. That issue has had a 12-month reprieve with the cap on such rises announced by the Scottish Government, but there is an underlying principle that remains – being in business brings many challenges, some of which are under your control and some which you will just have to adapt to. The song in question’s chorus of “Nobody said it was easy”, seemed pretty apt.

How can business owners deal with these issues? Firstly, there must be a recognition of such issues coming on the horizon, and understanding what impact they will have. That is easier said than done, with the pressures of day-to-day management, and is the age-old problem of working in your business rather than on your business. However, if you don’t know that something is coming down the line, then you have no chance to plan for it. “What’s that coming over the hill is it a monster?” from The Automatic’s “Monster” anyone?

From a financial perspective, I believe it is critical to understand the cash flow of your business. Profits are subject to numerous accountancy matters that play a part in reporting financial performance, but don’t have a direct impact on cash flow – capitalisation of fixed assets and depreciation of those assets being simple examples. But profits don’t pay the bills; cash does. Destiny’s Child had it right with those “Bills, Bills, Bills”.

The gold star approach is to have a rolling 13-week cash flow forecast, that gives you visibility on cash requirements for the near future, coupled with integrated financial projections covering at least the next 12 months, for more strategic considerations. The dunce’s cap award goes to a financial director I once met who brought up his online banking system and pointed to the “today’s balance” number on-screen and said that was his cash flow forecast. Somewhere nearer the former and as far away as possible from the latter is where most well-run businesses are, and if that’s not you, then it is something that you need to rectify. Jimmy Cliff put it best – “I can see clearly now the rain has gone; I can see all obstacles in my way.”

By Nicola Rollings, Restructuring & Recovery Senior Manager

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