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Meet Makoto, creator of CaFE, a cash flow solution for SMEs Facts are better than simulation when it comes to Cash Flow

Makoto Fukuhara, founder and chief executive officer, CaFE Makoto has been in IT-finance for more than 20 years, having worked with IBM among others. He is driven by a desire to use technology to make life easier for small businesses and give them access to the sort of information that is normally the preserve of larger businesses. Makoto is a big rugby fan in his spare time.

When Makoto Fukuhara took up residence in this country nearly ten years ago it was for two basic reasons. First, his research had identified the UK as being the best place from which to launch his new cash flow management business, CaFE (short for ‘Cash Flow Engine’), where he remains the CEO. And, second, it would be the best location for him to indulge his passion for the game of rugby. His plan has worked out well on both fronts...


side from his interests on the playing field, Makoto Fukuhara’s focus is on helping smaller companies. Fintech has brought a whole new generation of financial products and services to the market, particularly in business lending, and he feels that many small businesses are vulnerable to the dangers of running out of cash and/or being overcharged for the crucial financial assistance they need to survive and flourish. That is where he expects CaFE to make its mark and where he thinks the role of accountants could make a huge difference. His biggest concern is that, while fintech platforms may be able to provide access to finance, what smaller companies really need is an early warning system to help them avoid running out of cash in the first place. The message appears to be getting through. At Xerocon London last year, the accountants who dropped by the CaFE stand for a chat were unanimous in their praise of the cash flow management tool – not just on behalf of the companies using it, but also for accountants like themselves who found it saved them a great deal of time and effort when trying to predict potential liquidity problems for their clients. 42 / Issue 14

Launched in December 2016, the original version of CaFE was aimed at SMEs using Xero software; it has since been developed to work alongside other accounting systems. There are currently around 100 CaFE users in the UK. The plan is to roll out the product to small and medium sized businesses in English-speaking countries around the world and it is already available on a limited scale in Australia. Ultimately, Makoto, who was once a business development manager at the mighty IBM, hopes to tackle the US market. What makes CaFE different from other cash flow monitoring products is that it works only with facts, not forecasts or simulations. Provided the facts are accurately fed into Xero, CaFE will tell the business owner or the accountant when, and on what scale, the company is likely to run into cash flow problems. Once ‘AutoSynced’, it is simple to maintain and requires very little management time, leaving owners to get on with other important aspects of running their business. A ‘Notifications’ feature alerts you on what you need to know based on your own factual information and criteria. Makoto believes that many SMEs

could help themselves by following a few simple disciplines of their own. For example, by making a plan at the start of every financial year and then reviewing and updating that plan as the year plays out. One of the major faults of most businesses, but particularly SMEs, is that owners have a natural tendency to be over-optimistic about sales prospects, but underestimate likely costs. Realism should always be the order of the day, especially when it comes to forecasting cash flow. There are the payments that companies must make – PAYE, NIC, payroll, rent, insurance, utilities and so on – and the amount of money companies expect to collect from customers – receivables over which they have less influence and control. Companies should check their bank account at least once a week to reconcile invoices issued with the cash that has been received, so that any monies outstanding can be quickly identified and acted upon – a call to a client to chase an unpaid invoice is far cheaper than dipping into an overdraft. Conversely, companies should make sure they pay invoices from suppliers and others on the due

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date to encourage a healthy credit relationship. If there is a persistent gap between money in and money out, then there is a problem that needs to be addressed and it’s more important to know the fact-based cash flow forecast than rely on a cash flow simulation. The solution could be to renegotiate terms of business; it is common nowadays for larger customers to extend arbitrarily their payment terms from, say, 30 days to 60 or even 90 days. Most small businesses do not have the same luxury, but still have to pay their own bills and salaries once a month. If the gap looks like it might be a permanent problem, a working capital facility or a business loan may be the answer. Either way, the company that can demonstrate it is in control of its business, and understands its cash flow, will have a better chance of securing the appropriate facility at the right price, than one that cannot demonstrate that it is master of its own financial destiny.

The other important message is that if a business is turned down for finance – by, say, its own bank – that need not be the end of the story. The law now obliges banks to offer the option of being referred to an alternative lender under the Bank Referral Scheme introduced in November 2016.

can only benefit fact-based cash flow applications like CaFE – and the small business owners who use them. In conclusion, Makoto says “What we want to support is the growth and development of SMEs, but not just by increasing the amount of credit available. However, I’d feel quite happy if CaFE works well as an ‘automated’ finance adviser in order for every single SME to spend more time increasing sales and profits, rather than studying cash flow.”

However, Makoto believes the financial landscape could be changed even more fundamentally by the introduction of ‘Open Banking’, an initiative launched by the Competition and Markets Authority which will force financial institutions, including banks, to share customer data - with the customer’s consent of course from January this year. This should open the way for more competition in banking and allow a whole range of new services to come to market. Obviously, it is too early to say exactly how this will affect small businesses, but anything that supports accurate financial reporting and eliminates guesswork

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Issue 14 / 43

Xu magazine issue 14 digital edition 22  
Xu magazine issue 14 digital edition 22