Budgeting Archives - BUSY01 and First Class Accounts Ovens and Murray

Category Archives for "Budgeting"

making it easier to get paid blog

Making it easier to get paid

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 and make sure you get paid on time?

Set out clear payment terms

Your payment terms are the starting point for healthy payment times.

These terms set out when you expect to be paid and form a legally binding contract with the customer.

You may expect immediate payment on receipt of the invoice. Or you might set out a specific number of days that the customer has to pay the invoice (generally 30, 60, 90 or 120 days, depending on your industry). This is sometimes called ‘trade credit’ and allows your customers to pay for goods and services at a later, pre-agreed date – helping them to spread the cost.

Your payment terms should also include details of any late payment penalties.

If the customer doesn’t meet your agreed payment times, most businesses will add a 1% to 1.5% monthly late payment fee to the outstanding bill. This acts as a great incentive for the customer to pay the bill, before the penalty fees start mounting up.

Invoice customers as soon as you can

In a business-to-consumer (B2C) environment, your customers will generally pay for their goods and services immediately. But when you’re working in the business-to-business (B2B) world, you’ll need to send your customer an invoice, asking for the money to be paid.

A customer can’t settle their bill until you send them an invoice. So, it’s vital to send out the invoice as quickly as possible, so you can minimise the gap between doing the work and being paid for the work.

In some industries, the project will be broken down into multiple invoices, paid across a period of time. This makes it easier for the customer to pay, and means you (as the supplier) don’t have to complete the project before receiving the money you’re owed.

Ideally, you want your invoices to go out as early as possible. This allows your payment terms to kick in and makes it easier to predict when cash will be coming into the business.

Be organised about your payment admin

Getting paid is a process – and the more organised you make the process, the quicker the payment will be received.

When you send out the invoice, make sure you send it to all the relevant people in the payment chain. This will usually be:

  • Your main contact at the client – the person who you usually deal with
  • The person who will approve the bill – the person who will green-light the payment
  • The finance team – the person (or people) who will actually action the payment.

It’s also a good idea to quote any relevant purchase order (PO) numbers that the customer has raised, and to give a very clear description of the work done, or the goods purchased.

Embrace the available payment technology

Invoices used to be hard-copy printed bills, but in the digital age the vast majority of companies will send out e-invoices.

Electronic invoices are easy to raise (usually from your accounting software or project management app) and can be emailed out instantly.

Doing everything in the digital realm also makes it easier to keep records and keep track of payments.

Many e-invoice systems will also let you add a variety of different payment options for the customer.

You could just include your bank details and wait for the customer to make a direct payment to your account. But you can also include payment buttons in the e-invoice that give customers the option to pay via digital payment gateways, like Stripe or GoCardless.

Offering more ways to pay makes the whole process more convenient for your customers. And it will generally result in faster payment times as a result.

If you want to speed up your payment times and boost your cashflow, please do get in touch. We can help you streamline your payment processes and embrace the latest in payment tech.

Cost of living

Coping with the skyrocketing cost of living

Coping with the skyrocketing cost of living

Whether it’s refilling your petrol tank or paying at the supermarket checkout, the higher cost of living is hitting every household hard.

Across the world, everyday essentials are surging in price, up 7.2% year on year across the OECD. Unfortunately, experts predict that prices will keep rising for at least the rest of the year.

What can you do to try to keep up with the increasing cost of living?

Here are our 12 top tips

Look for ways to earn more
  • Grow your business’s profitability (talk to us about improving your profits) or ask for a pay rise.
  • Take in a boarder or flatmate.
  • Sell your unwanted items online.
Cut back where you can
  • Prepare more meals at home and spend less at cafés and restaurants.
  • Create a budget and keep your spending under control.
  • Reduce the amount of meat you buy.
Find ways to use your car less.
  • Cancel your credit cards and your buy now pay later accounts.
  • Review all your ongoing expenses like utilities, insurance and subscriptions – cancel, switch providers or get better deals.
Invest in your future
  • Think about investing in ways that are likely to outperform inflation – both shares and the property market have historically provided returns higher than inflation.
  • Start a new business, launch a new product or service, or try a side hustle.
  • Teach yourself about money and finances using free tools online and books from the library. Better money management will help you make the most of what you’ve got.

If prices rise by 7% this year, it won’t be easy to increase your income by the same amount. But if you can increase your income by 5%, then make up the rest through savings, while also investing for the future, you can still come out on top once inflation settles down and prices stabilise.

Worried about budgeting, cash flow or forecasting?

Talk to us. We have years of experience through many economic cycles, including previous periods of high inflation – and we’re always here to help.

Christmas gifts

Christmas gifts for your customers and team

Christmas gifts for your customers and team

Christmas is nearly here, and it’s a great time to let your customers and team members know how much you appreciate them. 

But this has been a tough year. It’s not easy to know how much to spend or whether it’s appropriate to throw a party.

Gifts, cards and donations

The traditional professional Christmas gift tends to be food-related: hams; hampers; bottles of wine or spirits. Those can be ordered online and sent out, although it’s best to avoid anything that will spoil considering current delivery delays and people who may not be working in the office.

For customers or clients who you know really well, something tailored to their personal interests can show you’ve been paying attention. And for both customers and staff, a handwritten card is a lovely touch and costs very little.

Another option is a donation on behalf. Many people really appreciate an email or card that lets them know you’ve donated money to a charity on their behalf, particularly if you can include details like, “The local foodbank will use this donation to feed families on Christmas Day.”

If lockdowns allow, a coffee or lunch for higher value clients is an excellent way to build stronger relationships as well as making the most of the Christmas season. You might spend more this way, but for your best clients this can be far more memorable than a gift.

For your team, a hamper is probably a less popular choice. A Christmas bonus might be appreciated, but do run the numbers first. A supermarket voucher retains its full value, while a cash bonus must be taxed. Talk to your team – they may prefer a paid day off rather than any gift.

How much should you spend?

You might like to create categories based on how much your clients spend with you and how valuable they are to you. The top customers might all receive a larger gift, while the smaller customers might get a something more modest.

Christmas budgeting

Wondering how much each client or customer has spent? Not sure what you can afford to budget for Christmas gifts? We can help.

Get in touch and we’ll run the numbers to give you the insights you need.

The Fundamentals of a Business Budget

The Fundamentals of a Business Budget

The Fundamentals of a Business Budget

A business budget is one of the essential tools in managing your business finances and actively building your business.

A budget shows what you plan to do with your cash over the next year.

For a complete picture of your business health, you need to review the profit and loss statement, the balance sheet, the cash flow forecast and the budget. Taken together, these reports allow you to make informed business decisions and monitor performance.

Why have a budget?
  • Forecast sales and expenses according to monthly or quarterly variations.
  • Evaluate performance over time, including changes or patterns.
  • Get really familiar with where your money goes and where it comes from.
  • Clarify targets and goals and use the budget to help you focus and achieve those goals.
  • Comparing actual figures to budgeted figures allows you to see potential problems early and plan for unexpected costs.
  • A budget will help you to see the big picture and stay motivated over the long term.


Where to start

A basic budget takes known income and expenses, then makes certain assumptions about the timing of income and planned expenditure. The basic budget is based on cash in and out of the business.

Over time, as you start to see the benefits of using a budget, your budget should evolve into a more sophisticated version that includes non-cash elements such as provisions and depreciation.

Most businesses will start with one budget but soon move to having three budgets.

  1. Business as usual -  the next year’s budget is based on current year income and expenses, with perhaps a small adjustment for consumer price index increases.
  2. Worst case - budget is based on a pessimistic view of next year’s performance.
  3.  Best case -  budget is based on an optimistic view of performance over the next year.

A budget is usually for a financial year, but you can also set up budgets for two to five years.

Once you have one budget (or more) set up, you can then run your current financial reports against the budget to see how you are tracking. This allows you to make rational business decisions in real time to adjust accordingly.

Your can run your financial reports monthly and adjust your budget as needed.


Whats next?

It's never too late to to put a budget into place. Book a time with us to help you create a meaningful budget in your accounting software so that you can use it as a proactive part of your business management, strategy and your success.

xeros short-term cashflow feature

Xero’s short-term cashflow feature for businesses

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.

Review your expenses - and save yourself money

Review your expenses – and save yourself money

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 the level of costs and overheads that you incur as a company.

Why does this matter? Well, excessive spending eats into your cashflow, reduces your profit margins and stops you from achieving the profits that you’re capable of as a business. So if you can get proactive with your spend management, you can actually make your company a far more financially productive enterprise – and that’s great for your overall business health.

So, what can you do to reduce spend and slim down your company expenses?

Here are some key ways to reduce expenses:

Reduce your overheads

Your overheads are the unavoidable costs of running your business, producing your products or supplying your services. If you have bricks and mortar premises, these overheads will include rental payments, utility bills and even the cost of paying your staff. Drill down into the numbers and see where there are opportunities to reduce these overhead costs. That could mean moving to smaller premises, or reducing the size of your workforce, to reduce payroll expenditure.

Put limits on staff expenses

If your employees can claim expenses, or buy raw materials and equipment with the company’s money, these costs can soon start to rack up. It’s a good idea to put a spending limit in place, so each staff member can only spend up to an agreed amount. Having a clear expenses policy helps, as will training up your staff in good spend management techniques. Expenses cards – such as WebexpensesSoldo or Pleo – allow you to quickly set spend limits, track expenses and pull your expenses data through to your cloud accounting platform for processing.

Look for cheaper suppliers

If you can reduce your supplier costs, this will go a long way to bringing down your overall spend. If you’ve been with certain key suppliers for years, look around for new quotes, look at current market prices and see if you can negotiate better deals. And if your old suppliers aren’t flexible enough, try swapping to newer, more eager suppliers who will be willing to meet you in the middle on price.

Make your operations leaner

The bigger your operational costs are, the less margin you’ll make on your end products and services. One way to resolve this is to aim for a ‘lean approach’, paring back your staff, resources and operational complexity to the bare minimum. By making the business as lean as possible, whilst still delivering the same output, you keep your revenue stable, but reduce the spend level that’s eating into your cost of goods sold (COGS). The smaller your COGS, the more profit you make on each unit or sale – and that means better cashflow, more working capital and bigger profits.

If you’d like to get in control of your expenses, we’d love to chat. We’ll review your current costs and will highlight the key areas where expenses can be cut. Then we’ll help you formulate a proactive spend management programme, to reduce your unnecessary spending.

We can help. Talk to us about improving your spend management.

understanding working capital

Understanding working capital to maintain business success

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.

Your critical numbers

Your critical numbers

Your critical numbers

Establish your critical numbers; to improve the KPIs that have the biggest impact.

The Covid-19 crisis has created a “new normal” for businesses. Traditional ways of working are being challenged and we now need to innovate, adapt, re-engineer, and reinvent the way we work. Lockdown gave us time to consider our options, but two important questions often remain unanswered:

  1. How will we know if we are on track or not?
  2. Are our new plans actually working?

It goes without saying that our success needs to be measured. But it’s important for us to know what to measure. Your critical numbers are the levers that, if pulled, make the biggest impact to your results. Choose four or five critical numbers to measure. These may vary between businesses, for example, most businesses should know their minimum viable sales number per day or week for survival. Likewise, knowing the gross margin needed to cover your overhead costs and living expenses will be critical for many businesses.

Some tailored critical numbers might be:

  • Return on investment by each team member
  • Average value of proposals won
  • Number of networking calls or meetings
  • Number of days it takes your debtors to pay you

  • Once we’re clear on the critical numbers we should be measuring, we need to establish how to measure them. Having real-time, cloud-based data is the new standard, so having the right software is important. The way you capture data may require additional planning. For example, you may need to make changes to your coding or reporting structure to measure your sales or margin by product type to assess the viability of different product lines. These changes will help to give you peace of mind and certainty that you’re on track. After all, you can’t manage what you don’t measure.


    “Measurement is the first step that leads to control and eventually to improvement.” - James Harrington

    How healthy is your working capital?

    How healthy is your working capital?

    How healthy is your working capital?


    We all know that cash is king when it comes to business success, but what exactly is ‘working capital’ and how does this financial metric help measure the health of your business?

    Working capital is made up of the cash and assets that are available in the business to fund your operations and keep you trading. It’s worked out by taking your current assets (the things you own) away from your current liabilities (the things you owe to other people).

    So, why is working capital such a critical metric?

    Having the liquid capital needed to trade

    It’s possible for your business to be busy, successful and profitable, but for your cash position to still be in poor health – and that can have a serious impact.

    If you can’t readily convert your assets into liquid cash, it’s a struggle to meet your cashflow goals, pay your bills and fund your day-to-day operations. But with the optimum level of working capital, you strengthen your balance sheet and put the company in a solid financial position.

    To achieve this healthy level of working capital you will need to:

    Proactively manage your cashflow

    Cashflow feeds your working capital by pumping liquid cash into the company and keeping the balance between assets and liabilities in a strong position. But to achieve this, it’s vital to achieve a positive cashflow position, where your cash inflows are greater than your cash outflows. This means getting paid on time, lowering your outgoings and keeping a close eye on your ongoing cash position.

    Monitor and forecast your financial position

    Running regular financial reports helps you stay in control of your finances. With careful monitoring and forecasting of your cash position, you can ensure you don’t end up in a negative cashflow position, without the requisite working capital to trade and fund the next stage in your business plan. Cloud accounting software and business intelligence apps have made it easier than ever to create up-to-date, real-time reports and run dashboards that show your key metrics.

    Use additional finance when required

    If working capital is looking thin on the ground, then additional funding may be needed to bolster your balance sheet. Short-term finance options (such as overdraft extensions or invoice finance) and longer-term business loans can be needed to keep working capital on an equilibrium.

    Working closely with your accountant is vital if you want to promote the ideal level of working capital in the business. We can help manage your cashflow, monitor your financial metrics and provide access to additional finance and funding when your capital needs a boost.

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

    1 2 3