Cashflow / 11 posts found
Keeping your cashflow strong in tough times
Small businesses are particularly vulnerable in tough economic times. When sales are slow, there are still overheads and salaries that need to be sorted. Pre-planning and being proactive can help you weather tighter economic periods and allow you to continue to thrive. Make sure you have a clear picture of your payroll, and any other planned expenses that will need to be accounted for. If there’s even a possibility that there could be a shortfall, it’s essential to meet this head-on. Whether this means talking to your supplier or creditors to figure out an arrangement, or compromising on other business [...]
Bringing your cashflow processes into the digital age
Keeping on top of your cashflow is even more important during tough economic times. With a global slowdown on the cards, energy prices soaring and supply chain challenges, cash is likely to be tight over the coming year and beyond. Cloud technology and fintech apps, can give your business the best possible control over its cash. Why is cashflow so important? To keep your business operating, you need enough money coming into the business to cover your outgoings – with enough surplus cash to live on. When recession begins to hit, this can have a significant impact on your income. [...]
Cash is not Profit and Vice Versa
The purpose of a business is to make money, and that means you have to know the difference between profit and cashflow. Net profit is what you have left after you deduct all your business expenses from all your revenue. You change net profit only by changing the things that affect revenue and expenses. For example, if: You renegotiate with your suppliers, you may get stock cheaper, or carry less inventory Your staff engage with customers better, you can learn more about what they do and don’t like – and get more business You can roster staff differently, you may [...]
Review your expenses – and save yourself money
Running a business will always mean incurring certain expenses, or ‘spend’. There are always costs, overheads and supplier bills that mount up – and these expenses will gradually chip away at your cash position, making it more difficult to grow and make a profit. So, what can you do to reduce your spend levels? And what impact will this have on your overall margins, profits and ability to fund the next stage in your business journey? Getting proactive with your spend management Spend management is all about getting in control of your expenses – and, where possible, aiming to reduce [...]
Improve your debtor days to boost your cashflow
It’s important to stay on top of your debt collection to free up cash. Establishing how long it takes you to get paid is the first step, but how can you measure this? Debtor days measures, on average, how long your customers take to pay you. 'Debtor' is, in this context, just a fancy term for customer. While there are many complex formulas to accurately calculate this, a nice easy formula is: current debtors balance owing / annual sales * 365. For example, if you have annual sales of £450,000 and debtors owing of £80,000, your debtor days are 65 [...]
Remuneration strategy – Salary vs Dividends
As an owner-manager, your chief concern will be making your business profitable and building up cash reserves in the company. But you’ll also want to be able to extract funds from the business too – whether this is via a regular monthly salary, or ad-hoc dividend payments. Salary vs dividends is the most common split, but there are a number of different ways of extracting funds from your business, all of which can have different tax and capital impacts – both for you personally and for the company as a whole. Because of this, it’s important to have a clear [...]
Business tips: Getting in control of your spending
Keeping the business in a positive cashflow position is vital. But you can only do this if your cash inflows (sales revenues and other income) outweigh your cash outflows (overheads, supplier costs and other liabilities like tax costs or loan repayments). One way to re-balance the cashflow scales is to get in better control of your spending. This process of ‘spend management’ is all about reviewing your expenses, negotiating better deals with suppliers and getting a razor-sharp focus on reducing your cash outflows. Review your current suppliers Once you have a reliable supply chain set up, it’s very easy to [...]
Business tips: Making it easier to get paid
Making sure you get paid on time is crucial to your success. The process of making sales and generating revenue lies at the heart of any business model. But you can't manage your cashflow effectively or raise any profits if customers don't actually pay their invoices. The easier you can make it for customers to pay you, the faster you'll see cash coming into the business. That’s good news for your financial position, your ability to cover your operational costs and your capacity to fund the growth and expansion of your business. So, how do you speed up those payments [...]
Business tips: Budgeting and managing cashflow
If you want to stabilise your finances and grow the business, working to strict budgets becomes a necessity. Managing the cashflow twists and turns of a project can be hard work. But it’s easier to do when you have an agreed budget and can track your spending and performance. So, what’s the best way to stay in control of the budgets you’ve set? And how can you manage your cashflow position to make sure there’s always enough cash to fund the project? Understand the costs of each project Starting a project without fully understanding how much it will cost is [...]
High inflation: What does it mean for your business?
High inflation is hitting businesses and households hard in 2022. Across the world, inflation is running high, thanks to factors like pandemic disruptions, monetary stimulus and supply-chain issues. You’ll see the effects of inflation at the supermarket and the fuel pump – and in your business. Eroding the power of your pound Inflation increases prices, which eats away at the buying power of your pounds. For business owners, that means you’ll encounter higher costs from your suppliers. Materials are more expensive, transport has become far more costly, and basics from office supplies to utilities are all rising in price. In [...]