Cash flow is not an option, but a necessity

Whether we’re talking about the growth strategy of your company or maintaining a sustainable business, cash flow is the best indicator of your business’s performance. The dynamics of cash flow can give you a perspective on when and how to act in a certain situation (for example, when you need to cut expenses, when you need to generate more income to continue your business, or possible investments you can make).

We’ve talked to Marian and Raluca from TAGU about the importance of cash flow in their company, but also about the benefits of using a solution that optimizes the process of monitoring and planning their inflows and outflows.

TAGU‘s story started in the winter of 2014 when Bogdan Bot and Marian Popescu decided to open a company specialized in the production of electric fireplaces.

From the headquarters in Cluj and Oradea they’re coordinating all operations: from design and production, to storage and delivery of products to customers. And together with their team, they manage to sell their products throughout Europe, as well as in countries such as Ukraine, Turkey, the Republic of Moldova and Norway.

Cash flow is not an option, it’s a necessity

Being a newly established company in need of financing, one of the necessary conditions to receive funds was to put together a realistic and sustainable cash flow plan.

“On that occasion, we saw for the first time what a cash flow is and what it looks like. So we built it somewhat out of obligation for the first loan, but we quickly understood that it could be helpful for us too, in order to have a clear picture of the future and to see whether we can pay for our goods. Since then, for more than 6 years, we have been building our cash flow on a monthly basis in Excel.” says Marian, COO at TAGU.

As the years passed by and the company grew, the cash flow plan became more and more complex. Having seasonal activity and credit lines at 3 banks, the development of TAGU is conditioned by the ability to supply larger inventory and by the possibility to pay them.

The planning and monitoring process begins with the Sales department, which forecasts the sales volume for the next 6 months. Based on these forecasts, the Logistics department makes the production plan and calculates on a monthly basis the quantity of products needed in the warehouse.

“This means that we need to know 6 months ahead if we have the capacity to bear the cost of production and supply with the necessary inventory. So for us, cash flow is not an option, but a necessity.” – Raluca, CFO.

Once a month, they’re having a meeting with cash flow as the main topic, where the payment capacity for the next 6 months is checked. The revenue from sales and credit lines, but also the forecasted expenses are calculated as granular as possible: from bank fees and office cleaning services to supplies transportation or customs taxes for each import.

In the long run, Excel is not a good idea

Clearly, for TAGU, cash flow monitoring is vital. Over time, a simple table in Excel has become a document that’s hard to follow and update. The growing volume of transactions and the manual entry for each transaction in the previous month had become a hassle. The planning activity was not the most enjoyable either. The forecasts were manually introduced in Excel by each responsible person in each department during the monthly cash flow meeting and this activity lasted more than 4 hours. The outcome? A spreadsheet with 27 columns and 147 rows, hard to analyze and track.

Marian told us that he realized he needed a better solution in 2018 when they saw that Excel no longer reflected reality and they could no longer rely on it. “Everything had to be redone from scratch, so we thought there had to be a better method. We started looking for a cash flow software that could make our work easier and protect us from mistakes that might occur in Excel, mainly due to the manual entry of data and formulas.“

There is a better way

“I first learned about ThinkOut from Banca Transilvania; we also have a credit line with them. The solution was displayed on the BT Store hub and we immediately started evaluating it. I had no hope at all that we could find a cash flow software made in Romania. At that time, we had already started looking for solutions, but we had not found anything that could connect with our bank accounts.”, said Marian.

Until…

“During the 30-day trial, we discovered how ThinkOut works, how we can adapt the app to our needs, and how easily we can collaborate with the team behind ThinkOut. We started by deciding how to enter data in ThinkOut and we opted for the import of monthly bank statements. We then changed the predefined inflows and outflows categories and created new ones so we could have a more detailed overview, but also to make the forecasts more efficient.

We compared the cash flow generated by ThinkOut with the one we had in Excel and we saw the exact financial results. However, using ThinkOut helped us get the result in an easier manner. We can check and change the details in just a few minutes, not to mention that the forecasts can be added with a simple click.” – Raluca and Marian.

Cash flow looks better with ThinkOut

With ThinkOut, the sales team now has the real image of the cash flow situation in just a few moments. Those 4 hours spent updating the same Excel are long gone, and the tiring monthly meeting turned into a simple verification and planning activity.

The friendly and accessible interface gives them the ability to easily add bank statements, change the categories of inflows and outflows, match all settled transactions with their forecasts, and carefully plan their next income and expenses.

TAGU knows that cash flow forecasting is not something you can overlook, and a flexible planning tool, such as ThinkOut, can be the help you need to make important business decisions.

If you take care of your cash flow, your business can grow healthily. But don’t take our word for it, check Marian’s testimony: “In 2020 we will have a turnover of 14 million RON, an increase of 100% compared to 2019 and our goal is to maintain this trend and next year.” The TAGU story is a successful one, and we are proud and happy to be a part of their journey 🙂