Coming Out Stronger

What does the future look like?

2020 and the COVID-19 pandemic has brought significant challenges for many people, including business owners.

While we are starting to see an easing of restrictions and a return to (Covid) normal the impact of these challenges cannot be underestimated.

While we cannot be sure of what’s ahead, it’s important to be looking forward and planning for your future.
If you're a small business owner, you can become more resilient and in control by applying these few strategies.

Coming Out Stronger Strategies

Why data matters!

Xero's short-term cashflow feature for businesses

Business cashflow is simply money coming in and money going out of the business. Your outgoings will include things like rent, payroll, taxes and supplies. Your income will be revenue from sales but might also include investment funds or the sale of assets.

For most businesses, income and expenditure don’t always happen at the same time so focussing on strong cashflow management will help you prepare for the shortfalls and also manage surplus income.

Cashflow reports allow you to look back at cashflow in your business. This can uncover cashflow patterns over time and show you how much money you need to run your business each month.

Cashflow forecasts look forward by combining payment dates and due dates for invoices, to give you an idea of what your cashflow will be like going forward.

Managing healthy cashflow

Xero’s short-term cash flow feature gives you an up-to-date dashboard view of your organisation's cashflow. You can choose multiple bank accounts and see the projected cashflow over 7-30 days. The more information you include, the more accurate your forecast will be.

Healthy cashflow management gives you better control, so you are more prepared for growth or for the unexpected. Read the article at Xero Central to learn more about this feature.

We can help. Talk to us about improving your business cashflow.

Understanding working capital to maintain business success

If cashflow is the lifeblood of your business, then working capital is the health check you should regularly undertake to keep your business alive. It is important for you to have an understanding of your working capital to maintain business success. Regularly checking working capital will play an essential part in maintaining business success during these times of greater economic insecurity.

What is working capital?

Working capital is your current assets minus your current liabilities and measures the surplus (or deficit) you have to keep your business afloat without needing to sell assets, borrow more, or add your own money into the business. The more working capital you have, the easier it is to fund growth or weather any downturns.

To calculate your working capital: Cash + debtors + stock + work in progress - creditors - taxes owing

For example, if your business had the following balances:

Cash $150,000
Debtors $120,000
Stock $100,000
Creditors $45,000
Taxes owing $25,000

Then your working capital would be $300,000 ($150,000 + $120,000 + $100,000 - $45,000 - $25,000).

If the business had an overdraft of $150,000 rather than a positive cash balance, the working capital would be zero. This means the business would have no cash to cover any slowdown in debtor payments or a downturn in sales (which would lead to higher stock levels). Worse, the business could be in serious trouble for trading while insolvent.

It’s likely your working capital has taken a hit due to Covid-19. Now is the time to review your processes and boost your working capital.

Consider the following strategies:

Build up enough cash to cover at least 2 months’ sales value

One of the key learnings from lockdown was how important it is for businesses to have enough cash in the bank to get them through a shutdown. Use the average sales value for the last six months to calculate the amount you’ll need, then manage your expenses to build your cash stocks up to this level.

Renegotiate your debt

If your business has an overdraft, could the core debt be negotiated into a term loan? Have you spoken to your bank manager about options for managing your debt as a result of Covid? We can work with you and your bank manager to determine your best finance options.

Negotiate with suppliers

Speak to your suppliers and see if you can negotiate better terms. This might be a discount for early payment or longer payment terms. They’ll be suffering too, so work together to come to the best arrangement for you both.

Set aside money for taxes

Calculate the percentage of sales you need to put aside for taxes and put this aside in a separate bank account so you have the cash to cover tax payments as they fall due.

Inject sufficient funds

If the above strategies don’t boost your working capital sufficiently, you’ll need to invest your own funds into your business to cover your working capital requirements.

Even with the many challenges of a post-pandemic economy, undertaking regular working capital checks is an effective way to help increase your business’s cashflow. We can help you calculate your working capital requirements and identify strategies you can implement to increase your working capital.

“Change is not a threat, it’s an opportunity. Survival is not the goal, transformative success is.” - Seth Godin

We can help. Talk to us about your working capital.

Lessons learned in lockdown – for your business and life

Lockdown has been (and remains) a tough time for business.

Having to shut your business at short notice, or switch to an entirely digital, remote-working model, was a stressful experience. But there are things we have taken out of lockdown. Whether it enabled us to explore new ideas or dive into some fresh thinking regarding work, life or a business venture.

So, what lessons did we all learn from this enforced period of business shutdown, quarantine and remote working?

Carrying over the positives from lockdown

Suddenly, your office space lay empty, your employees were spread across various home locations and (crucially) your customer sales and revenue evaporated in the blink of an eye. The amazing thing about human resilience and ingenuity, however, is how quickly businesses DID evolve to cope with this situation.

Teams got used to home-working, video meetings and dealing with customers in the online space. And many of us began to see the positives of this low-impact, remote-working approach.

Are there things you can hang to now in the return to working life?

More time with family

With the daily commute no longer needed, and the ability to work remotely from our own homes, everyone had far more time to spend with their family, their partner or (via video calls) their wider circle of friends and family. Although enforced time together may have added a few strains, this extra time with our nearest and dearest is something we are grateful for – and should aim to continue.

More exercise and fitness time

finding the time to fit in a gym session or run was always tricky. The quieter pace meant that many could follow the latest workout video, go for a run, or get back on our bikes. We know exercise is good for both our physical AND our mental wellbeing - so it's important to keep this in your daily schedule going forward.

Future planning

working ON the business, rather than IN the business is an aspiration of any ambitious owner, but the time to do this is usually scarce. In lockdown, we’ve had far more time available to think through our core goals, what our next move should be and what our ‘post-coronvirus strategy’ should be.

Using data to understand your customers

Intuition is vital for business owners but if there’s data in your business that you haven't had the time to review, you may be missing opportunities. For some, lockdown provided some time for analysis such as, learning to use Google Analytics to understand how your customers find you, what your popular pages are, and which products are selling.

Getting in control of your financial model

 Huge drops in revenue have meant cashflow worries. We've been assisting clients to re-evaluate their financial model. Looking at costs, debts and potential revenue streams allows you see how you can reduce cash outflows and boost those all-important cash inflows. Reporting on these metrics will continue to support your business decisions.

None of us know exactly what the ‘new normal’ of business trading will look like. But if you want to be ready for a different kind of business reality, we can help. We’ll work with you to update your goals, strategy and financial model – so you’re ready for the future.

Talk to us. We are here to help.

Inventory management best practices for retailers

Inventory management is incredibly important in retail and yet studies reveal that 43% of small businesses either don’t track inventory at all, or do it manually. Proper inventory management can be the difference between a lost sale and a lifelong customer.

Here are some quick tips on how you can stay on top of stock control:

Understand the relationship between sales and inventory

Look at inventory and sales data together so you can see the relationship between the two.

For example, if you pull your sales results and see that dresses are 20% of your sales, and jumpsuits have only generated 4%, the instant reaction is to buy more dresses.

However, if you simultaneously look at your inventory results, you may see that while dresses generated 20% of sales, they represented 40% of your inventory, while jumpsuits generated 4% of sales but on 1% of your inventory.

By considering the relationship of sales to inventory, you might discover you are over-inventoried in one item, and missing opportunities to sell another.

Manage residual inventory to control costs and preserve profit

Residual inventory is what remains at the end of one selling season and is carried into the next season. A few examples include wool apparel that is on sale in the spring season or outdoor furniture sets that are marked down after the summer season.

An effective way to manage this is to create season codes with style numbers when you enter items into your inventory management system. This can make analysing sales and inventory by season a significantly easier task.

Equip your business with the right inventory management tools

From choosing the right inventory management software to finding a POS solution that fits your business, it’s essential to implement tools.

The right ones will integrate together to streamline and automate processes, making inventory management more accurate and efficient.

In a competitive market, knowledge is key to business success.

We can help you understand and integrate inventory management apps into your retail business. Get in touch to discuss how.

Managing cashflow and accessing emergency funding

Working capital is a vital component of any successful trading business – providing the liquid cash needed for everyday operations. Suddenly finding your business without this cash can be a shock, but there are ways to fill these cashflow holes and get the company back on track.

In short, it comes down to careful cashflow management, and ensuring you have the best possible routes to additional finance and funding provision.

Key ways we can help include

Helping you understand your cash requirements

The starting point of any funding search will always be to understand what your current cash requirements are. This means sitting down to review your whole financial position. Then, armed with this information, we can see exactly how much you’ll need to borrow.

Liaising with banks and lenders

We can put you in touch with the most suitable banks, lenders and alternative funding providers, and can help in conversations with these lenders. For example, you may want to discuss the possibility of extending your overdraft facility, or whether you could temporarily suspend principal payments etc.

Preparing financial information for lenders

Any lender will want detailed financial reporting to back up your loan application. We can produce up-to-date accounts, cashflow statements and forecasts to help banks and finance providers understand your financial health and the risk levels involved in lending to your company.

Accessing government assistance

The Government is offering a variety of ways to support businesses financially during the coronavirus crisis. We can explain what loans, grants, tax reliefs or filing extensions may be available to you, and can help you fill out all the relevant forms and applications to make a claim.

Improving your debtor tracking

Outstanding customer invoices is another key area to get under control. We can help you understand your aged debt position, and identify which invoices you should be prioritising when it comes to chasing up customers and finding mutually agreeable payment terms.

Extending credit from suppliers

The coming months will be tough for many businesses, so it’s worth having open and honest communication with customers and suppliers around when payments will realistically be made. Agreeing on small discounts, part payments or extended terms will all help to increase liquidity for everyone.

It’s likely to be a rocky road for many businesses over the next few weeks and months. So, working together as a business community to support each other will be essential.

If you’d like to get in control of your cashflow management and funding needs, we’re here to help. We can help you crunch those cashflow numbers, access the best possible routes to funding and remove some of the worry during these testing times.

Talk to us about getting on top of cashflow.

Social distancing: Running effective online meetings

In unprecedented times, businesses must adapt to remain productive. If face-to-face meetings are a key part of your daily business operation, here are some tips to take your meetings online with minimal disruption.

Find the best system for you

There's a range of free or low-cost platforms, including GoToMeeting, ezTalks, Join.me, Zoom, Google Hangouts, and TeamViewer.

Before you choose one, consider:

• How many people generally attend your meetings?
• Do you require screen share functionality?
• How many meetings do you run? (If it’s a lot, a small monthly subscription may pay off due to better functionality)

Schedule your meeting

Depending on your chosen system, consider how you schedule your online meetings. It may be that you include a link generated by your system into an email calendar invitation. However you do it, make it easy for your meeting attendees to be reminded of the meeting and access the meeting at the time.

Check your tech

Do you need a webcam (usually built into laptops) or an audio headset? These are a must for any online meeting. Communicate the need for this technology to your meeting attendees, and if required consider completing a quick online tech-check before the first meeting.

Set a clear agenda

Like any face-to-face meeting, you’ll need a well-structured agenda to follow. You’ll also need to specify the time a length of the meeting, and respect this. Decide who will take minutes, define the next steps, and if appropriate - BAMFAM (Book a meeting, from a meeting).

Does it need a meeting?

These unfortunate times act as a friendly reminder that some meetings can be emails. Consider using free tools such as Loom to document a longer and more engaging message in a video to send via email. The recipient can view the video multiple times before responding, resulting in a more considered reply.

Online meetings have been a great tool for global businesses for some time; maybe it’s time for your business to adopt online meetings as part of social distancing. They also create capacity for you to do other, more productive, things through reduced time spent travelling to face-to-face meetings.

We can help you.

Talk to us about which apps will best suit your team.