GETTING IT FUNDED 239
Using a surplus
There are two ways of looking at a cash flow surplus. If you are drawing up a business plan
for part of a larger organisation, your surplus might go to fund another part of the strat-
egy. A worthy use. If you are looking at the entire enterprise, you have a problem. Why?
Any surplus that remains after paying dividends or funding withdrawals from a partner-
ship or sole trader’s business will claw down your return on investment (ROI) – unless you
invest it wisely. As we discuss later, the largest ROI should come from minding your own
business. If ultimately you can earn more by putting the money in a bank, you might as
well sell the business and sit on a beach. It is time to revisit your strategy and put the sur-
plus to good use. Take another look at Chapter 6.
Getting it funded
If your plan is for internal use, you will probably know whether the cash flow is accept-
able. If you do not know, you should start asking questions now. You want the plan to be
feasible when you come to presenting it for approval – even if you still have to fight for
that extra bit of funding. If there is absolutely no chance of funding your strategy, you
need to revise it now and work back through the numbers until you arrive at an accept-
able cash flow projection.
If you are going outside for funding, you have to look at the amount of cash that you
need and decide whether it is realistic in relation to the potential return expected by your
backer and the associated risk that you are asking them to undertake. Let’s take a look.
If you are appraising someone’s plan, question carefully the cash flow
and the underlying assumptions. I have known executives who have
deliberately massaged cash flow forecasts to make them look acceptable.
Then, when the actual results were worse than ‘expected’, they did an Oliver Twist.
They went back to the management executive committee and asked for more –
knowing that the boss would have to give them the money that would not have
been approved at the outset. Genuine errors can happen but deliberate cheating
such as this suggests incompetence on both sides that usually ends in tears.
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