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Category Archives for "Cash Flow"

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.

    Lessons learned in lockdown

    Lessons learned in lockdown – for your business and life

    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.

    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. .