SECTION 2 – Cash management
Depending on how the instructors and yard staff are paid, and how your customers are invoiced can greatly change your cash flow model and your P&L.
So typically – Livery fees are paid monthly in arrears, instructors are paid cash for each lesson, tuition customers pay on arrival and yard staff are paid weekly.
This can create large monthly deficits which have to be financed from the owner’s resources, or expensive overdrafts must be negotiated.
Then add in costs such as feed, bedding, heat, light, power, let alone your salary and you have a major cash flow problem.
If the business is a livery/competition only yard, without tuition income weekly, the deficit would be far greater.
Consider what happens when the reverse happens: and the deficit becomes a surplus of cash.
So, livery fees are paid monthly in advance, instructors are paid monthly, tuition customers pay in advance for lessons on booking and yard staff are paid monthly.
The results will be obvious to see and now you have cash available during the month if needed. Your P&L will be improved because there will be no lost revenue through tuition and lesson cancellations and no shows.
All trade suppliers should be negotiated on 30-60 days payment terms with heavily negotiated discounts being sought.
Whether you run a yard, tuition centre or a riding school, cash management is fundamental to the operation of your business.
As we will see in later sections, cash flow forecasting is a vital business tool that should be constantly monitored, and re-forecast regularly as required, based on your P&L performance.
Key performance indicators and accurate metrics will be required aids to your cash forecasts.
Next . . . . . Generating success
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