Get in control of cashflow

It's an undeniable fact - cashflow is the lifeblood of any business. Without enough liquid funds coming in, it becomes harder to do the basics like trading and paying suppliers. Even worse, a lack of cash can eventually lead to failure for a business. That's why effective cashflow management is so important.

No one likes to think about potential financial disasters, but being proactive with your cashflow can make all the difference when it comes to keeping your business afloat. You need to understand not only where your money is going, but also how you can put yourself in a positive cashflow position so you have enough on hand to cover your expenses.

Fast ways to improve your cashflow

Managing your cash flow is an ongoing process.

Keeping close tabs on the numbers in your regular cash flow statements is key. A negative drawdown could be caused by insufficient sales, unpaid invoices, or not controlling costs effectively.

What's important is to take a complete approach and proactively find ways to improve your company's cash situation.

Some key ways to boost your cash position include:

Make it Easy to Get Paid – Using the Latest in Payment Tech to Speed up Payment Times

Getting paid quickly is essential for maintaining a healthy cash flow. The faster you receive payments from customers, the better off your business will be financially.

To make this happen more effectively, you should use modern payment technologies such as online invoicing software or mobile payment apps that allow customers to pay quickly and securely via their smartphones or computers. This will reduce late payments significantly and give your cash position a boost.

Track and Manage Debts – Chasing Any Late Payments To Reduce Your Aged Debt

Another way of improving your cash position is by tracking any outstanding payments due from customers so that you can start chasing them up promptly if they are late in paying their invoices.

Look into setting up automated reminder systems so that customers are sent reminders when they are overdue on payments. This will help reduce the amount of aged debt in your books which can have an impact on your bottom line.

Manage Spending Effectively – And Start Tracking Reviewing And Reducing Your Costs

There’s no point increasing income if it’s all going out again on unnecessary costs.

It’s important to keep track of where every dollar is going each month so that you can identify any areas where money may be being wasted unnecessarily. Once these areas have been identified, then steps can be taken to reduce these costs so that they don't eat away at any additional profits made by increasing sales or reducing aged debt levels.

Improve Your Sales and Marketing – Creating More Sales and Boosting Income

One of the best ways to increase your cash position is by boosting your sales revenue.

To do this, you need to make sure that your marketing efforts are effective at generating leads and converting them into customers. This means investing in the right marketing strategies such as website design, search engine optimization (SEO), content marketing, social media marketing, email campaigns, etc. You could also consider offering discounts or promotions to encourage customers to purchase from you more regularly.

Talk to us about improving your cashflow.

If cashflow is becoming a headache for your business, we can help you with cashflow forecasting and understanding your cash position to support you attaining that all-important positive cashflow position.

Get in touch to improve your cashflow.

Planning a financially stress-free holiday period

Holiday breaks are a chance to recharge for the year ahead, especially after the year we have had.

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.

Here are some simple strategies that can help you plan for a financially stress-free holiday period.

The strategies and tips shared below are generalised, however, we are here if you need to budget and prepare a cash-flow forecast.

Decide your Christmas and holiday break dates

Deciding when to take Christmas and holiday breaks is an important decision for businesses.

First, you need to consider your staffing and resourcing needs; how many people will be taking leave over the break period and who will be covering for those employees that take annual leave? Can your business afford to close entirely or run with a smaller team?

Once you have decided on your dates, share them with staff, customers and suppliers. It can provide peace of mind for customers; if they know how long you will be closed they can plan their spending accordingly. This will help ensure that your business runs smoothly during this time and that your customers are taken care of.

Budget and plan for annual leave

One of the most important aspects of budgeting and planning for annual leave is to factor in the pay rates for staff. At Christmas time, in most cases, these rates will be higher than standard hourly rates, so it's important to take this into account when creating your budget. Additionally, you must also take into account statutory public holidays. These days must be accounted for when calculating annual leave entitlements, and they cannot be carried over or swapped for another day.

Another thing to consider when budgeting and planning for employee annual leave is leave loading or long service leave. Staff may be entitled to receive this type of payment, which can add up to a significant amount of money depending on how long an employee has been working for your business.

By using software such as Xero, you can forecast your annual leave accrual and plan ahead. This will help ensure that you have enough money budgeted for staff wages during the holiday season. If you need help with this process, get in touch with us. We can provide you support to make sure that your annual leave planning is as accurate as possible.

Decide leave payments

There are many things to consider when deciding how and when to pay out your employees' leave payments during the Christmas break. For example, you may want to consider their preferences and travel needs, as well as any other financial factors that may impact your decision.

When it comes to making this decision, it is important to keep in mind the needs of both your employees and your business. Ultimately, the choice that works best for everyone will depend on a variety of factors, such as employee preferences, budget constraints, and company policies.

If you are unsure about what to do in this situation, it may be helpful to speak with your staff or consult with an HR professional for guidance. Whatever you decide, it is important to communicate clearly with your team and ensure that everyone feels supported throughout this process.

Overall, there are many things to consider when deciding how and when to pay out your employees' leave payments during the Christmas break. However, by carefully weighing all the different factors involved, you can make a decision that works well for both your employees and your business.

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).

1. Send out invoices as soon as the job is complete. This will ensure that your clients have the invoice and can make payment in a timely manner.
2. If you haven't already, sign up for online invoicing and payments. This will make it easier for your clients to pay you, and they can do it from the comfort of their own homes.
3. Follow up with clients who haven't paid yet. A gentle reminder can go a long way in getting those payments in before the holidays.
4. If all else fails, consider offering a discount for early payment. This may incentivize your clients to pay sooner rather than later.

Stocktake

Do you need to order in goods now to be able to complete your work in progress? Check that there is stock on hand available. If there is going to be a partial stocktake at the end of this financial year, now could be the time to get some extra stock in to make sure that you can complete orders.

If you are planning a stocktake for your business, it's important to prepare well in advance and make sure that you have all the necessary equipment, staff, and resources to complete the task effectively. This may include getting the help of a third party stocktaking company or enlisting your suppliers or distributors to provide you with any stock data they have on hand.

You should also communicate clearly with your team about what will be involved in the stocktake process and make sure that they are aware of any changes to your usual operations, such as working hours or product handling procedures. By planning ahead and taking the time to prepare for a stocktake, you can ensure that it runs smoothly and gives you the accurate data you need to make informed business decisions.

Capacity planning

It can be difficult to find the time and resources to complete a project before Christmas, but with careful planning, you can ensure that everything is done in plenty of time.

Start by prioritising which tasks need to be completed first, and make sure you have the necessary staff or equipment to get the job done. If possible, try to avoid taking on new projects or clients during this busy period, as your focus and energy will be elsewhere.

At the end of the day, it's important to remember that you can't do everything yourself, so delegate tasks where necessary and ask for help from colleagues or family members if you need it. With a little bit of planning and flexibility, you'll be able to make the most of the festive season and complete all your projects on time.

So if you're looking for a stress-free Christmas, take some time now to plan out your capacity and resources so that you can focus on what really matters this holiday season – spending quality time with friends and family.

Making an arrangement with the Tax Office

If your budget forecast indicates you won't be able to meet your tax obligations, 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.

Plan for the new year

In addition to the tasks above, having a solid plan for getting your cash-flow back in shape after the break is essential. To help you with this, look at reviewing your forecasts and budgets (including debtors), ensuring you have good management information available, and checking that all your key operational systems are running smoothly.

Talk to us about enhancing your financial support

If you identify that you'll need financial support over Christmas, now is the time to organise short-term financial relief like an arranged overdraft or 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.

Learning to make good business decisions

Making good business decisions is easier to do when you have excellent information at your fingertips – and that’s the value of having great reporting at the heart of your business.

Any cloud accounting software worth its salt will offer you straightforward ways to run your financial reports and track your important metrics. That’s standard in the new digital world. And this level of reporting gives you real, tangible data on which to base your decision-making. But good decision-making isn’t just about the numbers.

As well as having an effective understanding of your finances, you need a sense of what's good for your business, how decisions will impact on your growth and what your future path looks like.

Run management information at least once a month

Modern cloud accounting software makes it easier than ever to run detailed, up-to-date reporting on your financial position.

With the click of a button, you can run numerous in-depth reports and statements that show your past and future position. Doing this regularly gives you a wealth of financial information on which to base your decision-making and strategic thinking.

At each stage in your business' growth, you’ll have to make important decisions about your next step. So, it’s important to think about the financial implications of any new projects, the amount of cash in your business and the availability of new sources of funding.

Use metrics and projections to inform your decision-making

Setting up a custom dashboard to monitor the most important metrics and key performance indicators (KPIs) is definitely a good idea.

Most accounting apps will let you tailor your dashboard, so you can pick and choose from KPIs that are most relevant to your business.

Set clear and democratic targets for all of your main KPIs and track them on a weekly basis, so you’re monitoring the financial heartbeat of your business.

If cashflow is looking poor, look at freeing up some cash, or borrowing money to fill the gap. If sales revenues are dropping, put some renewed vigour into your sales activity, or get a new marketing campaign underway to raise awareness of your most profitable products and services.

Talk to your board and executive team when scenario-planning

You may be the sole founder of your business, or you may be part of a bigger team of co-founders. But the reality is that no one person can make all the decisions in a busy business.

To get the best overview of a challenge, or to come up with an effective way to grab a potential opportunity, you need to talk to your team – that’s the only way to get an effective consensus.

Talk through the current threats and opportunities and run through as many different potential scenarios as possible. What’s the best-case scenario, and how can you achieve it? What’s the worst-case scenario, and how do you plan for it, if things don’t go according to plan?

Work closely with an experienced external adviser

When you’re working in the business 24/7, it’s hard to see the business in an objective way.

Your judgement on some issues can be overly emotional and clouded by internal or political factors. Working with an experienced accountant, business adviser or business coach brings a fresh perspective to the business – both financially, strategically and emotionally.

Having a trusted external advisor on the team definitely helps you get your numbers straight. But they can also bring their knowledge and experience to bear on your strategic thinking, your decision-making and the impact of the business on your own mental health and wellbeing.

You can open up to them about your worries, share your aspirations for your business and bounce strategic ideas off them – taking some of the pressure off your shoulders.

Track how you’re measuring against your goals

To meet your goals and make good business decisions, it’s helpful to monitor and track your progress against these targets.

If you refer back to your reporting and KPI metrics, you can easily measure your performance over time – and take action if progress is starting to slip.

Areas to keep an eye can include your:

• Cashflow position – to make sure there’s enough cash in the business to keep your project moving forward and heading towards the agreed end goals.
• Sales figures and revenue – so you can see how you’re tracking against your sales targets and if the intended revenue from the project is being achieved.
• Budgets and expenses – to check that you’re not overspending on your project and that the team is being sensible with costs, expenses and essential overheads.
• Gross margin percentage – so you can keep the business profitable and aim to meet your profit targets for the period, or year-end.
  Growth against targets – to keep the business performing well and growing at the rate you predicted to meet your growth target for the period.
• Making a few bad decisions along the way is all part of the learning process. But by monitoring your performance and talking to the best advisers, it’s easier to keep the business on track.

Talk to us about forecasting and understanding your numbers. We’ll help you integrate the best possible management information apps into your business to help guide your decision-making.

Using forecasting to help your decision-making

Producing regular management information is one way to help improve your business decision-making. But looking at historical numbers can only tell you so much.

In business, you want to know what the future holds. And to make truly informed decisions about your future strategy, it’s important to use forecasting tools to project your data forwards in time. By running projections, based on these historical numbers, and producing detailed forecasts, you can get the best possible view of the road ahead – that’s invaluable.

Run regular cashflow forecasts

Positive cashflow is vital to the short, medium and long-term success of your business. Without cash, you simply can’t operate the business efficiently. Running regular cashflow forecasts helps you overcome this challenge. With detailed projections of your future cashflow, you can spot the cash gaps that lie further down the road, and take action to fill these cashflow holes.

Income can often be unpredictable, especially in challenging economic times. If customers fail to pay an invoice, or suppliers increase their prices, this can all start to eat into your available cash. Using forecasting, you can extrapolate your numbers forward to which weeks, months or quarters are looking financially tight. And with enough prior warning, there’s plenty of time to look for short-term funding facilities, or to get proactive with reducing your spending.

Run sales and revenue forecasts

Keeping the business profitable is one of the key foundations of making a success of your enterprise. You want your sales to be stable and your revenues predictable if you’re going to generate enough capital to fund your growth plans. And you need to know how those revenues will pan out over the course of the coming financial period.

Revenue forecasts work much like a cashflow forecast. Instead of looking at your future cash position, a revenue forecast gives a projection of your sales and how much revenue is likely to be brought into the business in future weeks and months. With better revenue information, you’ll be more on top of your profit targets. You can manage your working capital in a more practical way. And you can improve your ability to invest in new projects, additional staff or funding of the long-term expansion of your business.

Run different scenario plans

What’s going to happen to your business in the future? None of us have a crystal ball to predict this future path exactly. But by looking at different possible scenarios, you can run projections to see what the potential outcomes and impacts may be.

These ‘What-if scenarios’ can be exceptionally useful tools when thinking about big business decisions. What if there’s an economic recession? What if our sales increased by 25%? What if we raised our prices by 10% next quarter? What if we lost a quarter of our customers? By plugging the relevant data into your forecasting engine, you can run these scenarios and see how each option pans out. That’s massively useful when the worst (or the best) does happen.

Update your strategy, based on your forecasts

By making the most of your forecasting tools, you give your board, your finance team and your advisers the most insightful data and projections to work with.

A good business plan is designed to flex and evolve to meet the needs of the changing market – and the changing needs of your own business strategy. By making use of your cashflow forecasts, revenue projections and what-if scenario planning, you give yourself the insights needed to update your strategy and your business plan. You can make solid, well-informed decisions and keep yourself one step ahead of your competitors. In the dog-eat-dog world of business, that’s a competitive edge that can make a huge difference.

If you want to delve deeper into the positive benefits of forecasting, please get in touch. We can showcase the latest forecasting software and apps, and show you the value that’s delivered through well-executed forecasting and longer-term projections.

Coping with the skyrocketing cost of living

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

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

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

Here are our 12 top tips

Look for ways to earn more

• Grow your business’s profitability (talk to us about improving your profits) or ask for a pay rise.
• Take in a boarder or flatmate.
• Sell your unwanted items online.

Cut back where you can

• Prepare more meals at home and spend less at cafés and restaurants.
• Create a budget and keep your spending under control.
• Reduce the amount of meat you buy.

Find ways to use your car less.

• Cancel your credit cards and your buy now pay later accounts.
• Review all your ongoing expenses like utilities, insurance and subscriptions – cancel, switch providers or get better deals.

Invest in your future

• Think about investing in ways that are likely to outperform inflation – both shares and the property market have historically provided returns higher than inflation.
• Start a new business, launch a new product or service, or try a side hustle.
• Teach yourself about money and finances using free tools online and books from the library. Better money management will help you make the most of what you’ve got.

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

Worried about budgeting, cash flow or forecasting?

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

Plan for 2022!

What are your business goals for 2022?

The beginning of a new calendar year is an excellent time to review the year just finished and reflect on what worked, what didn’t, what you’d like to change and new things you’d like to implement.

Last year, there were inescapable impacts on businesses, with some thriving, others failing, and others just getting by. So what kind of year was 2021 for your business?

Take the time to review the year and acknowledge all that has happened, good, bad or indifferent. Examining the year with an objective perspective can provide valuable insights to prepare for the next business year. Planning and goal setting will help provide a focus for your business efforts.

Your Yearly Business Review

• What were the most significant impacts on your business in 2021? How well did you meet the challenges?
• What worked well last year? What systems, technology, products or services were successful?
• What accomplishments can you celebrate?
• What situation, event or experience provided the biggest learning opportunity?
• What is the biggest challenge or frustration you face as you prepare for 2022?
• What did you most enjoy during the year? Do more of it. What did you least enjoy? Do less of it!
• Analyse your financial reports. Are you earning what you’d like to? Is the business sustainably profitable?

Get Ready for a Great 2022

While there are many metrics you could evaluate to track business performance, we’ve given you just a few ideas to inspire your business planning for 2022.

If you’d like to chat about what you can do differently this year to enable your business to thrive, get in touch with us today.

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.

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:

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