Budgeting Archives - BUSY01

Category Archives for "Budgeting"

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.

    How to use forecasts and scenario-planning

    How to use forecasts and scenario-planning

    How to use forecasts and scenario-planning

    For centuries, accounting was all about reviewing historic information – but that only told you about the past, not what was going to happen in the future.

    If you’re only looking back at past periods and historic numbers, that limits the insights you can achieve into your business. With a backward-looking ideology, it becomes difficult to plan, run through different scenarios or understand the path of the business.

    Forecasting changes this. With the right data analysis and forecasting tools, you can project sales, cash, revenue and profits into the future – and get in control of your business.

    A forward-looking view of your business journey

    Forecasting switches the focus of your financial management. By moving to a forward-looking view of your business journey, you can see further down the road – and that helps to spot the opportunities and avoid the common business pitfalls.

    Forecasting adds value by:


    Highlighting the data patterns

    A forecasting tool takes your historic data and projects it forward in time. This helps you and your advisers to spot the patterns, trends, gaps and opportunities, revealing the true ‘story’ behind your business accounts. For example, forecasting may reveal a predicted seasonal slump in the next quarter, allowing you to plan ahead and proactively take action to minimise any negative impact.

    Giving you a future view of your business

    Instinctively, business owners will look back at prior periods to assess performance. There’s value to reviewing your historic actuals, of course, but using forecasting helps you to look forward, rather than just backwards. Forecasting is the satnav, showing you the road ahead, rather than the rear-view mirror showing you the road you’ve already travelled.

    Helping you scenario-plan

    With a financial model of your key drivers, combined with accurate forecasting, you can quick answer your burning ‘What if…?’ questions. Forecasting lets you run different scenarios, with different drivers, to see how business decisions may pan out over time. If option B performs better than option A, that’s invaluable information when defining your next strategic move.

    Making informed, evidence-based decisions

    Having ‘the full picture’ of combined historic numbers, forecasts and longer-term projections aides your business decision-making. Forecasting gives you solid evidence on which to base your strategy, and helps to red flag any threats that are looming on the horizon – giving you the best possible information to keep your executive team informed and on the ball.

    A deeper relationship with your accountant

    Forecasting also helps us to get a far more granular view of your business. This helps to spot potential areas of performance improvement, and to give you the best possible strategic advice, all backed up by solid, empirical data and management information.


    If you want to get in control of the destiny of your company, come and talk to us. Forecasting helps you highlight your future threats and opportunities – and create a proactive strategy to improve the performance of your business.

    Talk to us about the benefits of forecasting.

    Dealing with uncertainty – tips for business owners

    Dealing with uncertainty – tips for business owners

    Dealing with uncertainty – tips for business owners

    Whether you’re in full lockdown, restricted trading conditions or back to ‘business as usual’, there’s still real uncertainty for business owners. We’re trading in challenging times at present. And knowing what step to take next is a key worry. We know that you invest more than simply time and money into your business. It is more than a job but part of your identity.

    So, how do you get more clarity around your future plans? And how do you work on the short-term future of the business, when sales, income and cash are in short supply?

    Focusing your efforts in the right places

    Planning the next business move is difficult at the best of times, but it’s doubly problematic when we have so little clear idea of what a post-COVID19 business world will look like.

    It's difficult to plan when we don't know what will be possible. What regulations will be in place once you can begin trading? Will the market have changed dramatically? Will you be able to trade over borders and continue to be an international operation? Will you have enough cash to actually operate?

    As a business owner, you’ll be continually thinking of new business-critical issues to add to this list – but the reality is that you CAN’T control all these elements. This sense of mounting uncertainty is likely to raise your stress levels and make you more anxious.

    So, how do you overcome these worries and find a practical solution?

    Try to focus on the things you can control:

    • Identify the things that matter to the short and long-term success of the business
    • Find the things you can control and over which you have some influence.

    It's too overwhelming to try and work on everything at the same time. Instead, try to focus on the one thing you can achieve each day.

    Review your overheads and costs

    One way to reduce your cashflow worries is to reduce your spending. Look at your controllable overheads and see if there are ways to negotiate better terms with suppliers, cut down on expenses or pause any subscriptions.

    Talk to debtors and creditors

    If you can bring down your aged debt, that will help your overall financial health. Talk to any late-paying customers and agree when these debts will be paid. And talk to suppliers about extending payment terms, if possible.

    Consider alternative revenue streams 

    If your current business model doesn’t work well in lockdown, are there other online services that you could diversify into? Any new revenue streams will help to bolster your income and cash position.

    Update your website and marketing

    Having a great online presence is vital during this crisis, when most goods and services will be purchased online. Give your website a refresh and make it easy for potential customers to find and buy your services.

    Catch up with your team

    Maintaining contact with your employees is vital if you’re going to nurture team spirit. The more engaged your team is, the easier it will be to embrace change together.

    If you’re uncertain about the impact of COVID-19 on your business, please do come and talk to us. We’ll help you get in control of your finances, prioritise the right elements of your business and find a strategy that prepares you for trading in the post-coronavirus market.

    Talk to us about other strategies for dealing with uncertainty.

    key numbers to focus on in your business now

    Key numbers to focus on in your business now

    Key numbers to focus on in your business now

    As a business owner, it’s always been helpful to have an understanding of accounting – but in the post-lockdown world, it’s never been more important to have a good grasp on your finances.

    With the business world irreparably changed by the impact of coronavirus, your business is facing a ‘new normal’. Priorities have changed, customer behaviours have mutated and revenue streams have had to evolve and pivot in order to create a viable post-lockdown business model.

    To track, monitor and drive your financial performance in this new business world, it’s increasingly important to have a handle on your key financial reports and metrics.

    Getting to grips with your financial reports

    Whereas in the past, extra cash in the business may have been seen as a surplus that needed to be spent on something, COVID-19 has shown us that having these reserves is vitally important for the survival and long-term health of businesses.

    To truly be in control of this cash, it’s vital that you can dip into your accounts, financial reports and dashboards and ‘see the genuine story’ behind your financial position.


    So, what are the key reports to focus on? Let’s take a look:

    Budget 

    Your budget is the financial plan that's tied in with your strategic plan. In essence, the budget is your approximation of the money it will take to attain your key strategic goals, and the revenue (income) and profits you hope to make during this period. It’s a benchmark you can use to measure your actuals (historic numbers) against, allowing you to see the variances, gaps and missed targets over a given period.

    Cashflow Statement 

    A cashflow statement shows the flow of money into and out of your business. Understanding these cash inflows and outflows in detail allows you to manage this ongoing process, allowing you to aim for a ‘positive cashflow position’ – where inflows outweigh outflows. In this ideal positive scenario, you have enough liquid cash in the business to cover your costs, fund your operations and generate a profit.

    Cashflow Forecast

    forecasting allows you to take your historic cash numbers and project them forward in time. As such, you can see where the cashflow holes may appear weeks, or even months, in advance – and that gives you time to take action, whether it’s increasing your income stream, reducing your underlying costs, chasing up unpaid invoices (aged debt) or going to lenders for additional funding.

    Balance Sheet 

     the balance sheet shows you the company’s assets, liabilities and equity at a given point in time. In a nutshell, it’s a snapshot of what the business owns (your assets), what you owe to other people (your liabilities) and what money and profits you currently have invested in the company (your equity). The balance sheet is useful for seeing what stock and equipment the business owns, how much debt (liabilities) you’ve worked up and what the company is actually worth – all incredibly useful information to have at your fingertips when making big business decisions.

    Profit & Loss

    Your profit and loss report (P&L) Your P&L gives you an overview of the company’s revenues, costs and expenses over a given historic period of time. Whereas the balance sheet is a snapshot, your P&L is more like a moving video. It shows you how your finances are progressing by demonstrating how revenue is coming in and costs/expenses are going out (rather than cash coming in and going out, as you see in your cashflow statement and cashflow forecasts).

    cashflow and cost control

    Cashflow and cost control

    Cashflow and cost control

    More than ever, cashflow is a vital part of staying afloat, whether your business is in recovery or growth mode.

    Revenue, profit and your bottom line will all resume their importance when we’re back to “normal” (however that’s going to look), but keeping everything running is the priority for now.

    Regular cashflow forecasts will help you keep that in focus. Here’s why:


    Cost control  

    If you can't reach your targets for income, reining in your costs may give you a little extra head room to manage cashflow while you plan your next move.

    Visibility on outgoings 

    Cost control can be a challenge when it’s hard to pinpoint hidden costs or where established ways of doing things cost more money than they should. You may also have been coping with unexpected expenses, as you’ve adapted your business for unplanned circumstances.

    Improving business practice

    It's more than just keeping an eye on outgoings (though that's important). It's about looking at each aspect of your business and business systems (or the gaps where there should be business systems) to see if poor practice is driving costs up unnecessarily.

    It can be useful to break it down  

    You can look at cost centres such as office supplies or freight. Or you can look at what those costs do for your business.

    It can help to analyse costs in terms of cost of sale and overheads.


    Cost of sale and overheads​​​​

    Cost of sale (also known as Cost of Goods Sold or CoGS) is how much it costs you to make a sale. In a business which sells products, CoGS is based on the price paid for the product, plus any costs necessary to put the merchandise into inventory and make it ready for sale, including shipping and handling. You can even break it down to calculate the cost of sale of individual units.

    Overheads are general business expenses. They can’t be tracked directly to sales. Overheads are what it costs you to open your doors (whether online or actual) every morning.


    What’s your plan?
    • Reduce unnecessary expenses - Now might be the time to trim every expense that’s not related to your core product or service.
    • Suppliers - Are you able to work with your providers to ask for discounts or more favourable payment terms on either cost of sale or overhead expenses?
    • Talk to the team - Analyse your costs and involve your team, including frontline sales staff.
    • Advertising - It might be a false economy to cut back on advertising, as customers are online looking for bargains and price-checking alternatives. Targeted campaigns might work better.
    • Prioritise - Can you pinpoint the products most likely to bring the fastest or best return and hold back on products that are a slower sell?
    • Promote or discount - If you have old or slow-moving stock, can you discount it and convert old stock to cash? If you can attract customers now, you may be able to use it to spotlight your other products.

    Every dollar you can pull back from your costs can go straight into cashflow.


    Want to get a handle on cash flow in your business?

    Whether your sales are boom or bust, you want to make sure that your costs aren't holding you back. We can help.

    Talk to us if you'd like to review your costs and your systems to keep costs under control. .

    reduce your debtor days

    Reduce your debtor days and improve your cashflow

    Reduce your debtor days and improve cashflow

    Managing the gap between the receiving money into your business and paying money out of your business is vital for sustaining viability.

    Debtor days is the average number of days taken for a business to receive payment for goods or services. Keeping track of the average number of days for a business to receive payment is important in understanding the cashflow gap you might experience and the impact on cashflow planning and budgets.

    How to calculate debtor days

    (Year-end receivables amount ÷ annual sales) x 365 days = average debtor days.

    Here's an example: An IT consultant has in her terms and conditions that payment is due 21 days after invoice date. But she is interested to know what the actual average payment time is.

    Trade debtors at 30 June 2019 = $35,000

    Annual sales for 2019 = $478,000

    (35,000 ÷ 478,000) x 365 = 26.7 days

    With this information, she can either alter her cashflow planning according to the actual time-frame or take steps to reduce the average number of debtor days.

    Here are ten things you can do to reduce the payment times?

    1. Update your payment terms

    Make sure the terms are clear on every invoice issued. Don’t forget to include bank details on the invoice!

    2. Regular admin

    Schedule a regular time for your own administration and get your invoices out promptly.

    3. Send to the right person

    When you send invoices, make sure you address the email personally to your contact. Send the invoice to multiple addresses if possible, for example, your contact and the accounts department.

    4. Use technology to your advantage

    Use automated invoice reminders to notify customers when an invoice is about to be due and then when it is overdue. Do not wait to send notifications manually, let the software do it as soon as the invoice is a day overdue.

    5. Make it easy for your customers

    List the payment terms, for example, due in 14 days, as well as the actual due date.

    6. Provide incentives for early payment 

    For example, a 5% discount if paid within five days.

    7. Offer several payment methods for clients

    Make it easy to pay by adding an online option such as credit card or PayPal.

    8. Offer instalment payment plans over a mutually agreed period. 

    This allows you to plan for part payments, rather than being inconvenienced by the whole invoice being paid late.

    9. Do not offer unlimited credit to customers

    Make sure your terms and conditions include the right to refuse further supply if invoices are outstanding. Request part or full payment before supplying more goods or services.

    10. Talk to your suppliers

    Maintain good relationships and clear communications so they are more likely to help you if you need an extension on your bills. If possible, renegotiate supplier terms that suit your business cashflow.


    During tough times it can be difficult to get paid on time. Use low activity phases in your business to update your terms and conditions, implement alternative payment options, think about ways of making it easy for customers to pay you and clarify information on your website.

    Talk to us about adding payment options, updating your software and improving business systems to assist in reducing the number of debtor days to improve your cashflow.

    We can also look at average debtor days of your business compared to industry averages and discuss ways of managing cashflow during difficult periods.

    6 secrets to getting prompt payment

    6 secrets to getting prompt payment

    6 secrets to getting prompt payment

    If you’re struggling with late payments, and about half of small businesses are, here are some simple tips to try.

    Invoice without delay

    Your customer can't pay until you've invoiced them, so make sure you send you bill promptly. Customers are also more open to paying when they've just recieved the goods or services that you delivered. Cash in the goodwill, there's no reason to delay.

    Include all the information

    Make sure you invoice has all the right information, including a description of the work or product, the date it was ddelivered, and any customer requirements such as a purchase order number. Some customers have very specific requirements so ask what they need to see on the invoice. Make the due date clear too.

    Ask for prompt payment

    Customers used to get weeks to pay invoices, but that's changing. More than a third of businesses now request payment within a week. Consider doing the same. Starting off at seven days will help set an expectation of prompt payment. 

    Be easy to pay

    Customers will pay faster if they can use their prefferemd method to hand over the money. Consider whether you can offer them a variety of options, like a credit card or PayPal.

    Chase payments

    Your job's not done when the invoice goes out the door. You'll need to follow up with the customer to make sure it's being processed. If the invoice goes past due, it's time to make a phone call.

    Talk to us about your invoicing system, we can help you get paid faster.

    create cash flow forecast

    How to create a cash flow forecast for your business

    How to create a cash flow forecast for your business

    A cash flow forecast is an important tool for business planning. And right now, understanding the cash coming in and going out of your business is vital.

    A cash flow forecast will show you how long your business can continue to survive on current sales levels, by showing you how much money you’ll have in the bank at the end of a period.

    It will give you an understanding of what the revenue drivers are in your business, and give you visibility of your expenses and the things you can control. Having this information in a forecast will also allow you to plan for different scenarios, work out your priorities and understand the outcomes of different options such as diversification.

    A cash flow plan can give you a proactive tool to deal with uncertainty. If you are seeking funding in the form of a loan, applying for business support or just establishing your long term survival, you'll need a cash flow plan.

    What information do you need?

    We can help you to create a plan for your business. The plan is only as good as the data you have. So here’s what you’ll need to get started:


    Understanding where your cash is coming from

    Start with revenue from sales - break your sales figures up by product line and across channels. This will show you where the cash is coming from. For example:

    • Does 80% of your revenue come from only 20% of your products?
    • Do you sell to different markets and does one deliver more revenue than others?
    • Are some of your products high value but low volume or low value at high volume?

    The data you collect will enable you to ask questions, such as can you reduce margin to lift sales, can you push volume up or are there other channels to sell through?

    Make sure you include all other revenue streams, such as grants, tax refunds or investment in your cash inflows.

    Understanding expenses - where is the cash going to?

    This will include all the costs associated with your business, including rent, wages, supply materials, bank loan fees and charges, tax bills, and electricity.

    If you have a bank loan, include the details such as the length of the term and the monthly payments.

    Your cash flow plan should also include tax payments when they are due and any capital expenditures.

    Some of your variable expenses will directly relate to revenue such as freight or materials. When your sales stop, these will drop too, so your cash flow plan should reflect this relationship in order for you to scenario plan.

    Controlling expenses - what costs are fixed and what are the variable costs that you can control? You may not be able to stop fixed expenses like rent, power and internet, but you could reduce the cash going out on petrol and travel, cleaning, and even directors' drawings.

    Making informed decisions in your business

    A good cash flow forecast will collate all the data from your business in one place. It will allow you to plan and work out how long your business can weather a storm. It will also help you make decisions around staffing, purchasing inventory, ordering supply materials or investing in growth.

    It’s worth remembering that a cash flow plan is a different tool to a budget. Here’s one example: a budget will show sales but a cash flow plan will show the cash benefit of those sales. If you offer credit to customers, your sales may not result in immediate cash flow.


    Want to get a handle on cash flow in your business?

    If you’re not certain of how to get this information from your accounting software, talk to us about which reports to run. You may need a combination of accounting software reports and projected figures.


    Use the information above to source the data you’ll need and get in touch. We can help you build a plan that gives you cash flow projections to assist your decision making.

    Keeping your cashflow strong in tough times

    Keeping your cashflow strong in tough times

    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 outgoings, you must make a plan to ensure that the business, or your staff, won’t suffer.

    Minimise the stress of cash-flow

    Invoice early

    Send any invoices that you can, and in advance if possible. Perhaps consider whether you have any regular clients or customers that you could offer a retainer or similar deal to if they book services or make a purchase from you in advance.

    Chase payment 

    Use this opportunity to chase up any outstanding payments. Strong communication and relationships matter - talk to clients and chase invoices.

    Talk to suppliers​​​​​

    A little honesty can go a long way. Perhaps they can extend a line of credit for your payments to them. In most cases, a good supplier would rather offer a little flexibility to keep an ongoing business relationship.

    Review Inventory

    Can you find a cheaper supplier locally to avoid the shipping costs or discuss alternative products that allow you to reduce expenses?

    Review your costs

    It’s also a good idea to do a general review of expenses. Business costs can creep up, and it’s a great idea to make a time to check on your expenses regularly, no matter what your financial situation. Review all of your regular payments and subscriptions as well as upcoming costs. There may be travel, functions or purchases which you can decide on an alternative approach to.

    Talk to the bank or inland revenue

    If cashflow is tight, make sure you have conversations early so you have everything in place to see you through.

    Need help? We can help you implement strategies to protect your business for the long terms and help you alleviate cashflow worries.  Get in touch.

    covid-19 advice for employers

    Covid-19 Advice for Employers

    Covid-19 Advice for Employers

    Employers are facing unprecedented changes to the way of working, and many employers are having to do this with little or no preparation for such adversity.

    The Fair Work Ombudsman has updated their information on Coronavirus and Australian workplace laws to provide advice to employers on managing the situation. The advice is general in nature and reminds employers that the usual provisions of the Fair Work Act apply.

    It is important to note that the Fair Work Act does not have specific provisions or rules for a situation like this, that has such an unforeseen effect on business and employers.

    Employers and employees need to come to their own arrangements. Employers must communicate with employees what their policies will be in this situation, making sure that they are lawful within the Fair Work Act provisions.

    The Fair Work Ombudsman provides guidance on many topics including:

    • Health and safety in the workplace.
    • Directing employees to stay away from the workplace.
    • Quarantine and self-isolation.
    • Working from home.
    • Casual employees and independent contractors.
    • Redundancy and reduction of hours.


    Essential Information for Employers

    There is a great deal of information being published, and we encourage you to stay updated with the official websites.


    What you need to do

    We suggest you write a policy and plan for the business management of Covid-19 and provide this to employees as soon as possible. This should include guidance on working from home, productivity measures and expectations, personal hygiene, workplace safety, flexible working, user access to relevant tools and technology, leave policies, online security and safety, team communications, as well as any procedures or policies relevant to your business and industry in this situation.

    Remember, stay safe and maintain connection and communication with your employees throughout this challenging time.

    Need help navigating the support packages available?

    Talk to us. We are here to help.


    understanding your profit and loss statement

    Understanding your profit and loss statement

    Understanding your profit and loss statement

    Your profit and loss statement (P&L) helps you understand your business performance and profitability over time. It’s sometimes called an Income statement and its main purpose is to list income and expenditure.

    Whereas a balance sheet is a snapshot in time, the P&L shows transactions over a specific period of time. This can be a month, quarter, financial year or any other period, and it can be a stand-alone report or a comparative period report.

    Together with the balance sheet, these two reports provide a comprehensive understanding of the financial position and performance of a business.

    The profit and loss statement has two main sections: income and expenses.

    These may be further subdivided depending on the complexity of the business and reporting requirements.

    Income or Revenue

    Income primarily includes main business activities such as sale of goods or services. Other income such as interest received, capital gains or income from secondary business activities is also reported.

    Expenses

    Expenses are usually divided into two sections: direct costs, or cost of goods sold, and expenses. Cost of goods are those that are directly linked to the provision of services or sale of goods. For example, if you buy widgets from a wholesaler and sell them at a marked-up value, the cost of the widgets is a direct cost, not an overhead expense.

    Other types of direct costs might be importing and freight costs, contractor costs or certain equipment. Some direct costs are fixed, that is, they are the same from month to month, or they could be a fixed percentage of sales; others vary in value but are still related to the income producing activities.

    Overhead expenses are all the other expenses required to run the business, regardless of the level of income: for example, rent, utilities, bank fees, bookkeeping fees, professional development costs, vehicle costs and staff costs. Many of these costs form the basis of working out your break-even point, or how much it costs just to open the doors for business.

    There are some expenses which may be reported as a direct cost in one business but an indirect cost in another type of business, for example, merchant fees or contractor costs.

    The Bottom Line

    Total income minus total expenses results in the net profit (or loss), is often called ‘the bottom line’. Often business owners are just interested in looking at the bottom line, but a true financial picture requires an understanding of several reports and an ability to see the big picture that the reports are illustrating.

    The P&L is a vital tool to analyse for trends over time

    • What does your P&L tell you about relationships and ratios between sales and expenses, seasonal changes and annual trends?
    • Have all your direct costs been allocated correctly?
    • Have you recouped all billable expenses from customers?

    Financial statements help you understand the big picture for your business. With deeper understanding of your business operations and performance you can make informed decisions about your business finances.


    Business woman planning for seasonal dips

    Planning for seasonal dips in income

    Planning for seasonal dips in income

    Seasonal dips in income can be highly challenging when you’re a small business. But there are proactive ways to predict, plan for and overcome these dips in revenue.

    The key to dealing with seasonal dips is to know when they’re most likely to occur, and to have measures in place to spread your income and revenue pipeline over the course of the year.

    Understanding seasonality in your sector

    If your business is seasonal such as pool supplies, or a ski gear specialist, you’ll be used to the peaks and troughs, but many 'non-seasonal' businesses experience times during the financial year where sales and revenue peak – and, on the flipside, where sales and revenue experience a pronounced dip.

    When income is low at certain times of the year, it makes for challenging times.

    So, what are the key ways to plan for this kind of seasonality?​​​​​
    Forecast your seasonality

    It’s vital to know WHEN you’re most likely to experience any seasonal dips. Looking at bench-marking reports for your industry is one way to predict the seasonality in your niche or sector. But you can also use your own accounting data to great effect. Look back through your profit & loss reports and spot where the peaks and troughs have occurred over preceding years.

    Charge a premium in peak time 

    One straightforward approach is to apply premium pricing for your products/services during the busy season. By increasing your pricing, you boost your overall revenue, giving you more working capital to see you through the leaner months when sales and income are at their lowest.

    Offer additional peak-time services

    Offering added extras and other additional service lines during peak time is another way to maximise the season. In the months where customers are most engaged, look to upsell these premium services and offer more value. Satisfied clients will be more inclined to pay for added extras, giving you an increased revenue stream from the same number of customers.

    Target other markets

    Exploring other related markets is another useful tactic. When you’re experiencing downtime, look for other ways to monetise your existing assets, products or services. For example, if you’re a hotel where sales peak in summertime, offer discounted conference space in the winter months to boost revenue.

    Diversify your products/services

    If one product/service has a known seasonal dip, look at adding an additional product or service to offset this downtime. For example, a a ski resort could promote bike-riding or hiking breaks during the warmer summer months to keep revenue constant. Likewise a pool maintenance firm could establish an outdoor fireplace business for the colder months.

    Have a regional e-commerce strategy

    If you’re dependent on a small local market, broadening your marketing and e-commerce strategies can help to attract a wider customer base – and bolster sales. Paid advertising through Facebook, LinkedIn or Twitter can easily target new geographical markets, bringing in new customers and giving your revenue a much-needed uplift during seasonal troughs.

    Talk to us about planning for seasonality

    f your business is struggling with seasonal dips, and the resulting impact on cashflow, come and talk to us. We’ll help you identify the timing of your seasonal downtime, and come up with a clear strategy for stabilising your income across the year.

    Get in touch to start beating those seasonal dips.

    Financially stress free piggy on christmas holiday on beach

    Have you got a strategy for a financially stress-free holiday period?

    Have you got a strategy for a financially stress-free holiday period?

    Christmas holiday breaks are a time to spend with family, friends & have a chance to recharge for the year ahead. We look forward to warmer weather and finally setting up an out-of-office email for the break. However, for business owners, this time can be stressful without careful cash-flow planning.

    Even if you do continue to operate through the holiday shutdown season, your customers' financial behaviour may not remain the same.

    It can be pretty disappointing to work hard all year only to find that once you have paid staff, overheads and creditors, you have little or nothing left in the bank to cover your own time off.

    The strategies and tips shared below are generalised, however, we are here if you need to budget and prepare a cash-flow forecast. We can also help if you need assistance in applying for short term finance to get you through the break.

    Why is cash-flow planning particularly important at this time of year?

    Staff leave needs to be covered in addition to your normal fixed overheads like rent, creditors and tax compliance. The budget and forecasting process ensures you know your numbers and are prepared. If you are shutting down, you won't be driving revenue during this period and sales may take time to get started again in the new year.

    Here are some simple strategies that can help:
    Decide your Christmas and holiday break dates

    Confirm these with staff, customers and suppliers.

    Budget and plan for annual leave 

    Remember the pay rates may be higher than standard hourly rates, also factor in statutory public holidays.

    Decide

    If you are going to pay out leave in full at the beginning of the Christmas break or continue to pay as usual throughout the break.

    Review your work in progress (WIP)

    Plan to complete jobs or services that can be invoiced and paid before Christmas (remember if you don’t invoice and get paid before Christmas, you may not see the money until mid to late January).

    Capacity planning

    There is often a rush to get everything done before Christmas, whether it's the kitchen benchtop installed or the beauty treatment before the break, so make sure you have the capacity to maximise on this.

    Stock-take

    Do you need to order in goods now to be able to complete work in progress? Check that there is stock on hand available.

    Making an arrangement with the Tax Office

    if you find you can not make payments, it is possible to apply for an instalment arrangement. There are costs associated with this, however it may provide a solution that gets you through the holiday period. Talk to us, we can help.


    Talk to us about enhancing your financial support

    If you can’t make ends meet, now is the time to organise short term financial relief like an arranged overdraft of loan, rather than hoping it will come right. Please let us know if you need any help with cash-flow forecasting, budgeting or finance applications.

    Get in touch to improve your cash flow.

    Business man with umbrella what is the forecast

    What’s in the forecast?

    What’s in the forecast?

    When we set out on a fishing trip or hike, we always check the weather forecast.

    It’s no different in business. The forecast tells us if there’s bad weather (poor cashflow) in store based on the direction we’re heading.

    Your forecast will tell you:

    • 1
      Whether you have enough sales in the pipeline to give you the desired level of profit you want for the year.
    • 2
      Whether your margins are appropriate.
    • 3
      If you need to review your pricing or production processes.
    • 4
      If your business is running as efficiently as it could be.
    • 5
      Where savings can be made.
    • 6
      Whether you should invest more to get a better return.
    • 7
      How much money you need to set aside for tax.
    • 8
      How much money you can draw out of the business each month without running short.
    • 9
      How much debt you’ll be able to pay off.
    • 10
      Whether or not you will be able to meet all of the bank’s requirements.

    The difference between a business forecast and a weather forecast is that, when the business forecast is showing bad weather, you can do something about it to make the sun come out. The forecast will tell you what’s going well and what’s not, so you can make adjustments to reduce the impact of bad weather.

    Just as you wouldn’t go fishing without checking the forecast, you shouldn’t run your business without an annual forecast. So, don’t live in your raincoat, waiting to get soaked - take control and talk to us about getting your forecast done so you know what to expect.

    “Planning is bringing the future into the present so that you can do something about it now.” - Alan Lakein

    We’re here to help you, every step along the way. Get in touch!

    Teaching your kids about money

    Teaching kids about money

    Teaching your kids about money is all about finding the right moments to have a conversation. Each time this happens, you’ll be helping to strengthen their financial literacy and build their ability to make good decisions with money.

    The money we spend each day tends to be invisible. When was the last time you withdrew your cash for the week and used it to make purchases? Rather than dealing in notes and coins, we tend to reach for our cards or shop seamlessly online. It’s entirely possible to spend money without even reaching for your wallet.

    This can give kids some confusing messages about how money is spent. The danger here is that they won’t develop financial literacy and will struggle to manage their own money later on. One way to help them to build their financial management skills is to choose moments to talk to them about money and why you’re making certain decisions.

    These moments could include:

    Shopping a​​​​t the supermarket

    If you’re taking your kids on the weekly shop, get them involved in the process. Involve them in drawing up your shopping list and talk through your budget. Have them help you to find items, and weigh up differently-priced options. As a bonus, helping them to understand how a food budget works might just cut down on all those requests for treats!

    Withdrawing money from the ATM 

    Getting out money does seem a little magical. So it’s important that kids can make the connection between the money you go to work for, and what they see coming out of the wall. Talk to them about where the money you’re withdrawing will go and help to understand the importance of knowing what’s in your bank account.

    Letting them make choices 

    When it comes to pocket money or money from a birthday or Christmas, it can be helpful to let your children experience the consequences of their financial decisions. It’s tempting to tell them what to do with their money, but once they discover that they can only spend their precious cash once, take the time to talk with them about what they are feeling and how they might use their money differently in the future.

    Choosing activities 

    When you choose what to do as a family, don’t forget to talk through the costs of different options. Kids will appreciate balancing an expensive trip to the movies with a free picnic in the park or will be amazed when they compare the cost of an icecream at a parlor versus a whole tub at the supermarket. Encourage them to brainstorm and research low-cost ideas and get creative!