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Upsizing or downsizing: forecasting can help

Upsizing or downsizing: forecasting can help

2020 and 2021 have created a number of challenges for the average business. Depending on your business purpose and strategy, you may need to either upsize, or downsize, to secure the long-term future of your company.

But what are the implications of upsizing or downsizing, your operations? And how do you refine your business so it's fit for purpose and ready to take on your new aims and goals?

The answer is to look carefully at your forecasting and your future decision-making.

Looking at the ongoing needs of your business

Our experiences of the pandemic have demonstrated one very clear lesson – you never know exactly what lies around the corner for your business. But the more prepared you are, the better you can respond, as and when new threats and opportunities do appear.

With this in mind, forecasting and scenario-planning can be exceptionally important tools.

Rather than crossing your fingers and hoping for the best, you can plan for two, three or more different outcomes – with different strategies and tactics for each separate scenario. You can’t bullet-proof your business, but you CAN make sure that you at least have a Plan B (or C).

Scaling up, or scaling down?

By making constructive use of forecasting, you’ll be able to see the most viable path for your business. From here, you can make a decision on whether upsizing, or downsizing, is the most appropriate action for the long-term health of your business.

Some key questions to ask during your decision-making may include:

Do you have enough funding to grow, or do you need to downsize?

Knowing how much working capital you have available in the business is a vital piece of information. If you have a healthy balance sheet, a workable funding strategy and access to lenders, you’ll be able to fund your growth. If your cash reserves are depleted and access to finance is limited, now may be the time to shrink the business and consolidate things down – helping you to survive to fight another day, even if it is at a reduced scale.

Do you need more, or fewer, employees?

If your market share has dropped, you may need to downsize your team. And if you've hit a winning streak of sales, you may need to upsize your workforce to meet demand. Look at what resourcing you need and the types of skills, capabilities and long-term knowledge you need from your team in order to meet your new goals and targets.

Do you need to train your existing people?

If your business purpose has evolved, or you're moving more into the online or digital arena, you may need to train up your staff. Upskilling your people helps to bring them more in line with modern digital business practices, software and online customer interactions, all of which helps to increase your operational capabilities and your customer service levels as a business.

Do you need the same number of branches/shops/offices? 

If you've instigated remote working or hybrid working, you may not need so much office space for your people. And if you’ve moved a lot of your business to online selling, fewer bricks-and-mortar outlets will be required. Cutting building lease costs and/or commercial mortgage expenses can be a serious cost-saver for the business. Conversely, if you’re aiming to scale up, it’s likely that larger premises will be needed – resulting in higher property costs, but increased income from your scaled-up operations.

Do you need new equipment, machinery or vehicles?

Knowing what tangible assets you need in the business is an important part of your new business plan. If you’re expanding your operations, new equipment and/or vehicles will be needed to meet the new demand. This is likely to mean taking out third-party finance, or digging deep into your cash reserves. If you’re downsizing, there’s potential to sell-off existing equipment and assets and to free up this equity for other projects in the business.

Talk to us about scenario planning and decision-making

If you’re in the process of evolving or changing your business purpose, please come and chat to us. We can help you review your existing business plan, run scenarios and forecasts, and look at the long-term future path of your business.

5 ways to improve your cash flow

5 ways to improve your cash flow

5 Ways to Improve your Cash Flow

In our last blog, we discussed ways of managing your cash flow. We know that cash is the lifeblood of any business, so here are 5 more tips to help you improve your cash flow.

 If the cash dries up, problems quickly begin to multiply. By keeping the cash running freely and you can continue to grow your business.

Here are five tips for improving your cash flow:

1. Have a system to manage your debtors. 

Come up with a clear, step-by-step way to handle outstanding accounts. This might include:

  • automated reminders on unpaid emails
  • a phone call or email when the amount has been outstanding for a certain period of time
  • a stop credit on the client when they exceed an acceptable payment time.
2. Be prepared for tax time 

One of the fastest ways to run out of cash is to find yourself short at tax time. Talk to your accountant about tax planning measures you can implement to ensure you can make your compliance and tax obligations. 

3. Try not to dip into business funds for personal spending

It’s always tempting to tap your business account for personal spending. Instead, try to keep them separate. If you’ve over-saved at the end of the tax year, you may be able to draw down a nice bonus. That’s much better than being caught short.

4. Sell old stock

Too much stock? Consider old stock, old furniture, machinery or even stationery: they can all be sold to free up space and provide a small cash injection.

5. Forecast your cash flow

Create a cash flow forecast (we can do this with you) and that will help you monitor and measure the flow of cash in and out of the business.

Need help with forecasting or cash flow management? We’re here for you. Feel free to get in touch.

benefits of forecasting

What are the benefits of forecasting?


What are the benefits of forecasting?

There are many benefits to forecasting for your business.

First and foremost is that you’re more likely to maximise your profits if you are able to accurately project your revenues and expenses.

Additionally, accurate forecasting helps you to identify potential opportunities and manage your cashflow. And when you have this information you are able to make educated decisions at the right time for your business.

Here are some examples of questions that an accurate forecast of your cash flow could help you answer:

  • Can I start creating a new product/service?
  • Can I open a new office/location or start selling in a different area/country?
  • Can I afford another member of staff or outsourced assets?
  • Can I take more money out of my business?
  • Am I at risk of running out of cash?

How do you create a forecast?

The short answer is you don’t have to do it manually anymore.

Forecasting Apps, such as Futrli, mean that the complex, manual time-consuming forecasting is a thing of the past. Forecasting is now possible with the click of a button.

An added benefit of using Futrli to forecast, is that you can test out your decisions before you make them.

Using automated predictions means you have a second brain on your business 24/7.

Futrli

  • Creates separate predictions for invoices, cash transactions and journal entries
  • Works out how many days it takes for invoices to be paid for every account
  • Accounts for Covid-19 where it sees a potential impact
  • Considers ‘what we thought the month will look like’ compared to current month actuals and adjusts accordingly
  • Reads account names and looks for account-specific patterns
  • Creates staff payroll predictions just like your payroll software does

And the information is presented in chart format, making it easy to understand.

How far into the future should I forecast?

Forecasts are most beneficial for looking at the next year. They should be used in the short term for immediate planning and decision making and medium to long term to assess and extrapolate current trends.

It’s important to remember that the further you look into the future, the less accurate your cash flow forecast will be as there are too many unknowns yet to pass.

Talk to us about forecasting and how Futrli can benefit your business. 

Coming out stronger

Coming out stronger

Coming Out Stronger

What does the future look like?

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

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

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

Coming Out Stronger Strategies

  • If you have been receiving JobKeeper 1.0, forecast your eligibility for JobKeeper 2.0 and 3.0
  • Prepare and maintain a cashflow forecast with and without JobKeeper
  • Know the key dates where Government support changes, reduces, or ceases
  • Prepare a breakeven analysis for various scenarios
  • Regain perspective by booking a meeting with your bookkeeper 
  • Set a regular review meeting to review and interpret your monthly numbers and key indicators
  • Do a check of your first quarter profits and do a forecast of your future profits to work out if any 2021 tax needs to be set aside
  • Document your future plans for your business - immediate exit, gradual exit, continuation, diversifying
  • If you haven’t already done it, get your 2020 Income tax done or scheduled for completion as soon as possible
  • Review your systems and processes to see where improved efficiencies can be made, especially through the introduction of apps that can reduce paperwork (and the time involved) considerably

If you are seeking advice on business Apps, we specialise in understanding the different options for different industries and businesses. We provide you with insights and guidance on what Apps would best suit your business.

Or, if you're interested in any of these measures contact us to discuss how we can help you become more strategic, resilient, and in control.

understand your cashflow statement

Understanding your cashflow statement

Understanding your cashflow statement

Understanding your cashflow statement means you know how your business has generated and used cash (and cash equivalents) within a specific time period. And this gives you an overall picture of your business performance. 

It is another important financial statement to understand in conjunction with the Profit and Loss statement and the Balance sheet. These three reports provide a good understanding of the financial position of your business.

How does it work?

The cashflow statement integrates the information provided by the profit and loss statement and the balance sheet into a current cash position.

Your cashflow statement is reported on a cash basis, while your other financial statements are usually reported on an accrual basis. Accrual income (from the profit and loss statement) is converted to cash by calculating the changes in the balances of asset and liability accounts.

Report categories

Your statement of cashflows is organised into sections that report on different types of business activity.

  1. Operating activities - all business income, expenses, assets and liabilities (except for those assets and liabilities reported in investing and financing activities).
  2. Investing activities - the purchase and sale of long-term investments, property, plant and equipment as well as security deposits paid to suppliers or received from customers and dividends received.
  3. Financing activities - the changes in balances of equity accounts, for example, issuing and repurchase of stocks and bonds and payment of company dividends if applicable. Loans are also included in financing activities.

Formal financial report packages usually include notes to the financial statements. The notes contain supplemental information that explain significant items or activities that did not involve cash transactions. 

Why is it useful?

Your cashflow statement gives you a valuable measure of cashflow in and out of the business over a given period. It shows the ability of your business to pay bills and fund operating activities. This gives you a picture of overall performance.

It also shows the relationships between assets, liabilities, equity and cash accounts. Your cashflow statement shows changes and movements over time. Whereas the balance sheet and profit and loss reports show account values at a single point in time.

Your cashflow statement gives you vital information on your business.

  • How strong is your cash position?
  • What is the long-term outlook for your business?
  • What activities generate the most cashflow?
  • What is the relationship between your net income and your operating activities? 
nine ways to improve your business

Nine ways to improve business performance

Nine ways to improve your business performance

Supercharge your business with some simple tips.

Here are nine ways to make sure that you continue to drive through each business quarter with purpose, vision and the courage to super-charge your business.

1. Get a plan

You don't go on a journey without a map or any idea of where you're headed - so why fly blind with your business? Have a planning process, create a plan and execute. 

2. Eliminate distractions

Time is the scarcest resource and biggest killer for most businesses. When we get busy we can also get distracted and focus too much time and energy on the wrong things. Be brave - slash standard meeting times, reduce unnecessary admin and delegate roles and responsibilities.

3. Use technology

Technology can help you decrease admin, improve communications, improve reporting and accountability. Whether it's for team communication or cloud accounting, slash paper and automate where possible. Talk to us about the different Apps that can help you make your business more efficient. 

4. Keep on top of the numbers

Do you have enough information to monitor business cashflow and see emerging trends? We can help you identify the metrics to track on a regular basis, in order to run your business efficiently.

5. Say goodbye to bad customers

If possible in your business, get rid of ten time-wasters, bad payers, or customers who cause you pain. You will feel instant relief and spend your time better elsewhere.

6. Surround yourself with positivity

Make sure the people in your business understand and share your vision. Bring them onboard, listen to them and give them ownership. Don't let people who don't get it, or don't care, be a millstone around your neck. If they're not right, do them a favour and free up their futures.

7. Be different

Break the mould and position yourself to attract ambitious, growing and engaged clients, and employees.

8. Deploy marketing

Create a simple marketing plan to increase reach and penetration. Set aside a budget to treat this seriously. Start by making sure you really understand your customers. Existing customers are prospects too, keeping them happy is your first step. The more you know about them, the easier it will be to attract more of the same.

9. Take a break

Don't underestimate the time you have away from your business. It can allow you to come back refreshed with new enthusiasm and inspiration for the way forward.

Whats next?

If you would like to know more about ways to improve your business performance, book a time with us to discuss your options.

Your business success is important to us and we are here to help you.

six reasons to look at your financial reports

Six reasons to look at your financial reports

Six reasons to look at your financial reports

Making time to look over your financial reports each month is an important task for any business owner.

If you are not taking the time to do this, either because you’re too busy, or perhaps you don’t really understand what you’re looking at and it doesn’t make sense to you, then here are six reasons to look at your financial reports.

But before we get our six reasons, let’s talk very quickly about which reports to look at.

At a bare minimum, and depending on the complexity of your business, you should be looking at the following:

The Profit and Loss report (P&L)

As the name suggests, your P&L tells you how your business is performing over a period of time, such as a month or a financial year. In broad terms it shows the revenue that your business has generated, less the expenses for that same period. In other words, it shows how profitable your business is.

The Balance Sheet

The Balance Sheet shows the value of the business’s Assets, Liabilities and Equity.

  • Assets include things like money in bank accounts, Plant and Equipment, Accounts Receivable balances
  • Liabilities include things like Bank loans and credit cards, Accounts Payable, and Hire Purchase balances
  • Equity is the difference between your Assets and your Liabilities and includes Retained Earnings and Owner Funds Introduced
Accounts Receivable Ageing Report (Aged Receivables)

This shows how much money is still owed to the business as at a certain date in time, and is usually segmented as to how overdue they are, or sometimes by how far past the invoice date they are. Generally, you will have Current, 30, 60 and 90 days columns.

Accounts Payable Ageing Report (Aged Payables)

This report shows who the business owes money to as at a certain date in time and, like the Accounts Receivable Ageing report, is usually segmented by overdue period.

So, why bother? (six reasons)

1. Understand your business better

By looking at your Profit and Loss report monthly you will get a good picture of how your business is performing month by month and it will give you a better understanding of what makes up your profit. It can be helpful to compare periods, or to look at a month by month P&L, so you can clearly see on one page the revenue and expenses month by month. This will help to identify trends in your data and many also help to highlight anomalies in coding/categorising.

2. Accurate information for lending purposes

If you are applying for a loan or an overdraft, the bank or financial institution will look closely at both your Profit and Loss report and the Balance Sheet as a lot can be learned about a business by looking at these reports together. If you are unsure what some of your balances are in your accounts, get in touch and we can explain them further.

3. Get paid quicker and reduce bad debts 

By looking at your Accounts Receivable Aged Summary each month you can follow up with overdue accounts promptly which often results in getting paid quicker. The longer an overdue amount is left unpaid the higher the risk of it not being paid at all, so it is important to keep on top of this.

4. Better relationships with your suppliers

Assuming you are entering your supplier bills into your accounting software (recommended for most businesses to get an accurate profitability figure) your Aged Payables report will alert you to any unpaid or overdue amounts. Supplier relationships are an important aspect of your business and paying on time is crucial to maintaining those relationships.

5. Better cashflow

Having an accurate understanding of how much money the business is owed, and how much money the business owes, can help with cashflow planning to ensure that there is enough money when needed. Additionally, understanding the trends of your business, its profitability drivers, its expenses, etc., can help to plan sales and marketing campaigns so that the revenue keeps coming in.

6. Better decision making

Your financial reports tell the story of your business and it’s important that you understand the story that they are telling you. The better you understand what’s going on in your business the stronger position you will be in to make better business decisions that affect the profitability of your business and its financial viability.

Whats next?

If you would like to know which reports are relevant to your business, and you want to better understand what’s going on in your business , then book a time with us to make a time to go through them with you.

Your business success is important to us and we are here to help you.

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.

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