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There are many ways of improving Cash Flow for a business and we have given you a few ideas to do just that.
To help you see how these ideas can help your business it would be whole while doing some cash flow projections. The Cash Forecaster can be used as a management tool to identify critical costs areas of the business and how these impact the future cash-health of the business.
For example – you might like to experiment with introducing Factoring or Invoice discounting to improve the flow of cash from your customers whilst you are in expansion mode – Just because a business is making a profit it might still fail if the profits are turned into cash – Remember ‘Cash is King’ in business!
You may have heard of the term ‘Over Trading’ – Over trading is where a business is making good sales and turnover but that it is not able to keep up with the payments to suppliers simply because their customers are late in paying the company. The obvious way to correct this is to make sure that your payment terms to your suppliers are more generous than those given to your customers. Alternatively, the introduction of Factoring will help.
Having a Cash Flow Management tool to hand will help you to explore the effect these ideas will have on your business:
1. Increase sales and in particular those involving cash payment or payment by either standing order or direct debit.
Reduce direct and indirect costs and overhead expenses.
2. Consider increasing your prices and especially to your slow payers – see Bowraven’s “Profit Increase Software”
3. Review the payment performances of customers and be more selective when granting credit – start using a credit report company to check the credit worthiness or potential customers.
4. Consider up-front deposits or multiple stage payments – approach a loan company to advance the money to you and offer credit terms to customers.
5. Reduce the amount of credit given to customers and change your payments terms – i.e. reduce the time allow for customers to pay.
6. Introduce factoring or invoice discounting to accelerate receipts from sales.
7. Make sure that your sales invoices are raised as soon as the work has been completed.
8. Offer early payment discounts and consider introducing late payment charges or fees.
9. Generate regular reports on receivable ratios and aging or your customer balances and use more pro-active collection techniques – involve your sales team and make sure that any commissions are only paid where customers pay the company.
10. Consider the 80/20 rule with regards to your customer list and product lines – make sure you know where your profits are coming from. You might well find that 80% of your profits are coming from 20% of your customers or 80% of your profits from 20% of your product lines – if either of these are true consider not dealing with the 80% of customers and cancel the 80% or not profitable product lines. Be careful when do this, as it might be that certain products are reliant on others.
11. Take a look at how you pay your suppliers – ask for extended credit terms. Get new quotes from other suppliers and re-negotiate prices of supplies.
12. Try to reduce your stock levels (inventory levels) and improve control over work-in-progress – make sure that you are billing work in progress on a regular basis and keep under review write-offs.
13. Sell off or return obsolete/excess stock (inventory).
15. Defer or re-stage all capital expenditure.
Plan these and which work best for your business by using a tried and test Cash Forecaster.
Bowraven has recently launched it’s latest versions of the Cash Forecaster with the following versions:
- Cash Forecaster – Basic: Will forcast for up to 12-months on a monthly basis.
- Cash Forecaster – Standard: Will forecast for up to 3 years on a monthly basis for each year.
- Cash Forecaster – Vision: Will forecast for up to 5 years on a monthly basis for each year.
- Cash Forecaster – Pro and Pro Plus: will forecast for up to 7 years on a monthly basis for each year.
The latest version have been fully revised and re-vamped and include the following features:
- Forecast profit and loss and cash flows for up to 7-years on a monthly basis for each year.
- Balance sheet for the opening period and at the end of each period end.
- An option to enter up to 10 loans or hire purchase (Depending uponthe version you purchase) with a number of key features allowing you to have loan repayment holidays, interest charged to the loan or directly to the cash flow and much more.
- Up to 20 product lines with associated cost of sales lines (the number of product lines depends upon the version you purchase.
- Automatically calculates overdraft or deposit interest.
- The feature of entering flexible customer payment terms ranging from cash sales, 30-days, 60-days, 90-days and 120-days. Not only that you can allocate percentages to each payment term, as we all know customers never pay on the same date as each other.
- Flexible supplier terms allowing you to allocate a different term to each cost of sale and expense line.
- Automatic credit card charges where this is appropriate to your business.
- VAT or Sales Tax terms – the Cash Forecaster will do all the necessary calculations.
- Company tax calculator with features that allow you to adjust the profit to a taxable profit and the rate of tax and when it is paid for each of the forecast periods.
- Flexible depreciation rates and automatic calculations for any number of rates and methods that you can choose.
- Up to 30 overhead expense lines – each with its own supplier payment terms.
- Simple stock and work in progress feature.
- Factoring or Invoice Discounting option with a number of great features to allow you to see the effect of either starting or finishing invoice financing (available on the Vision, Pro and Pro Plus versions only).
- Easy income and cost of sales sensitivity analysis tool without the need to re-enter data so that you can trial various scenarios.
- Easily enter dividends or drawings by business owners and capital introduced or director/partner loans.
- Other debtors and other creditor facility.
- You can easily enter your opening balances of your business.
- Flexible headings that can be changed to suit your needs.
- Reports include an assumptions report, summary page of the forecasts which has a breakeven analysis, Cash flow forecast, profit forecast and trading summary showing the product lines, overhead report, balance sheet report, fixed asset report, loan report and VAT/Sales Tax report.
For more information and to download the latest Cash Forecaster – click here.
I am sorry for those readers of my blog that I stopped posting a weekly summary of the stock market indexes together with currencies and commodities.
This ended on 26 September, as I was not sure that this service really added to my blog, as there are already plenty of places to get this information.
However, if there are readers of this blog that have been affected by this decision please let me know and I will re-consider my position on this subject.
Gold has reversed it’s climb and closed down below the $1,000 mark this week – on the same week as oil dropped back significantly.
Oil dropped by 8.4% to close at just over $66 per barrel in the same we that has seen all world stock markets close down and Sterling took a bashing!
End of the week saw:
| |
This week |
Last week |
Change |
| Stock exchanges: |
|
|
|
| FTSE 100: |
5,082.20 GBX |
5,172.89 GBX |
DOWN 1.8% |
| FTSE 250: |
9,060.44 GBP |
9,306.93 GBP |
DOWN 2.6% |
| UK All Share: |
24,944.83 ZAX |
25,792.05 ZAX |
DOWN 3.3% |
| US DOW: |
9,665.19 USD |
9,820.20 USD |
DOWN 1.6% |
| US S&P 500: |
1,044.38 USD |
1,068.30 USD |
DOWN 2.2% |
| US NASDAQ: |
2,090.92 USD |
2,132.86 USD |
DOWN 2.0% |
| Japan Nikkei: |
10,265.98 JPY |
10,370.54 JPY |
DOWN 1.0% |
| China H Seng: |
21,024.40 HKD |
21,623.45 HKD |
DOWN 2.8% |
| Australian ASX 200: |
4,713.30 AUD |
4,693.20 AUD |
UP 0.4% |
| German DAX: |
5,581.41 EUR |
5,703.83 EUR |
DOWN 2.1% |
| French CAC 40: |
3,739.14 EUR |
3,827.84 EUR |
DOWN 2.3% |
| Spanish Ibex 35: |
11,643.80 EUR |
11,777.30 EUR |
DOWN 1.1% |
| Currencies: |
|
|
|
| UK Sterling £ to US Dollar $ |
1.59507 |
1.62174 |
DOWN 1.6% |
| UK Sterling £ to Euro € |
1.08541 |
1.10390 |
DOWN 1.7% |
| UK Sterling £ to Japanese Yen |
142.903 |
148.347 |
DOWN 3.7% |
| UK Sterling £ to Aus $ |
1.84052 |
1.87184 |
DOWN 1.7% |
| US Dollar $ to Euro € |
0.680635 |
0.680689 |
DOWN 0.0% |
| US Dollar $ to Japanese Yen |
89.5975 |
91.4828 |
DOWN 2.1% |
| US Dollar $ to Aus $ |
1.15424 |
1.15415 |
DOWN 0.0% |
| Commodities: |
|
|
|
| Nymex Crude oil |
$66.02 |
$72.04 |
DOWN 8.4% |
| Gold |
$991.60 |
$1,010 |
DOWN 1.8% |
A marketing partner is another business which can complement your business or help to refer new customers your way in exchange for reciprocal referrals.
A good example of this is if you leave some of your leaflets in the sales area of a fellow business, preferable in the same town or area as your business and in exchange you have their leaflets in your reception area.
To take this concept a little further you could introduce promotional schemes; for example…you could put on your sales literature “When you buy a pizza you get 20% discount off of XYZ video store”. At the same time as you offering this you can get XYZ video store to offer a similar promotion so that when a customer rents a video they will get 20% off pizzas at ABC pizza store.
If you tie people in like this you are more likely to get customers from the video store visiting the pizza shop and visa-versa…thereby both businesses will benefit. Many a time when someone gets a takeaway they will also want to watch a video, so this is a great fit for a pizza type business.
If you do not own a video store or indeed a pizza shop, then I am sure you can think of some great complimentary business links to your company. I suggest you go and speak with the business owners to see if you can do a deal or two!
Gold continued to climb above the $1,000 per ounce mark and ended the week at $1,010 per ounce.
Another good week for all but Japan’s stock markets which all moved in a positive direction and most notably the Australian ASX closing up 4.4% on the week.
On the currency market both Sterling and the US Dollar weakened against the major currencies with Sterling closing at just over €1.10 at the end of the week.
End of the week saw:
| |
Last week |
This week |
Change |
| Stock exchanges: |
|
|
|
| FTSE 100: |
5,011.47 GBX |
5,172.89 GBX |
UP 3.2% |
| FTSE 250: |
9,207.89 GBP |
9,306.93 GBP |
UP 1.1% |
| UK All Share: |
25,567.39 ZAX |
25,792.05 ZAX |
UP 0.9% |
| US DOW: |
9,605.41 USD |
9,820.20 USD |
UP 2.2% |
| US S&P 500: |
1,042.73 USD |
1,068.30 USD |
UP 2.5% |
| US NASDAQ: |
2,080.90 USD |
2,132.86 USD |
UP 2.5% |
| Japan Nikkei: |
10,444.33 JPY |
10,370.54 JPY |
DOWN 0.7% |
| China H Seng: |
21,161.42 HKD |
21,623.45 HKD |
UP 2.2% |
| Australian ASX 200: |
4,496.10 AUD |
4,693.20 AUD |
UP 4.4% |
| German DAX: |
5,624.02 EUR |
5,703.83 EUR |
UP 1.4% |
| French CAC 40: |
3,734.89 EUR |
3,827.84 EUR |
UP 2.5% |
| Spanish Ibex 35: |
11,452.60 EUR |
11,777.30 EUR |
UP 2.8% |
| Currencies: |
|
|
|
| UK Sterling £ to US Dollar $ |
1.62630 |
1.62174 |
DOWN 0.3% |
| UK Sterling £ to Euro € |
1.13707 |
1.10390 |
DOWN 2.9% |
| UK Sterling £ to Japanese Yen |
152.270 |
148.347 |
DOWN 2.6% |
| UK Sterling £ to Aus $ |
1.93159 |
1.87184 |
DOWN 3.1% |
| US Dollar $ to Euro € |
0.699178 |
0.680689 |
DOWN 2.6% |
| US Dollar $ to Japanese Yen |
93.6300 |
91.4828 |
DOWN 2.3% |
| US Dollar $ to Aus $ |
1.18772 |
1.15415 |
DOWN 2.8% |
| Commodities: |
|
|
|
| Nymex Crude oil |
$69.29 |
$72.04 |
UP 4.0% |
| Gold |
$1,006 |
$1,010 |
UP 0.4% |
If you advertise your business then you must trial your adverts and test to see which ones work the best for you.
By trialling your adverts you should agree on a design and more importantly the content of your advert and run each one for around a month at a time. At the end of each month change the advert to a different design and/or different content and so on. When you are testing your adverts you must make sure you take your marketing calendar data into account too.
At then end of each trial make a note of how many enquiries each advert received and of those enquiries that went on to converted into clients. As you collate this data you will begin to build a picture of which adverts work the best for you and use the ones that produce the most responses.
You should look at advertising as an investment and, as with any investment, you want to get the best return from it. If you divide the cost of an advert by the number of enquiries this will give you the cost per enquiry – for example if an advert cost you £1,000 and you got 100 responses – each response cost you £10; However, if an advert that subsequently cost you £1,000 and produced 200 responses – your return on investment or ROI has been doubled and the cost per enquiry halved.
All businesses should have a marketing calendar!
So what is a marketing calendar?
During the course of the year you should track where your enquiries come from and which ones lead to customers. At the same time you should record which month the enquiries come in to your business so that you can build a picture of which months are your busiest and which ones are the least busy.
Once you have compiled this data you can put this into the form of a calendar and then use this to your businesses advantage. By knowing which months in the year you already get most enquiries; you can then plan further advertising in those months to really capitalise on the months in which your customers are looking to buy.
Secondly, you can look at the months where you are short of enquiries and look at complimentary products to shore up your business in those lean months.
Gold broke the $1,000 per ounce this week to close up 1% on the week at $1,006 per ounce.
Also, a very good week for all world stock markets which all moved in a positive direction and most notably the UK’s FTSE250 moving up by over 5% on the week.
On the currency market the US Dollar has strengthened against the major world currencies this week, whilst Sterling has dropped back.
End of the week saw:
| |
This week |
Last week |
Change |
| Stock exchanges: |
|
|
|
| FTSE 100: |
5,011.47 GBX |
4,851.70 GBX |
UP 3.3% |
| FTSE 250: |
9,207.89 GBP |
8,745.85 GBP |
UP 5.3% |
| UK All Share: |
25,567.39 ZAX |
24,719.17 ZAX |
UP 3.4% |
| US DOW: |
9,605.41 USD |
9,441.27 USD |
UP 1.7% |
| US S&P 500: |
1,042.73 USD |
1,016.40 USD |
UP 2.6% |
| US NASDAQ: |
2,080.90 USD |
2,018.78 USD |
UP 3.1% |
| Japan Nikkei: |
10,444.33 JPY |
10,187.11 JPY |
UP 2.5% |
| China H Seng: |
21,161.42 HKD |
20,318.62 HKD |
UP 4.1% |
| Australian ASX 200: |
4,496.10 AUD |
4,435.50 AUD |
UP 1.4% |
| German DAX: |
5,624.02 EUR |
5,384.43 EUR |
UP 4.4% |
| French CAC 40: |
3,734.89 EUR |
3,598.76 EUR |
UP 3.8% |
| Spanish Ibex 35: |
11,452.60 EUR |
11,222.70 EUR |
UP 2.0% |
| Currencies: |
|
|
|
| UK Sterling £ to US Dollar $ |
1.62630 |
1.66809 |
DOWN 2.5% |
| UK Sterling £ to Euro € |
1.13707 |
1.14278 |
DOWN 0.5% |
| UK Sterling £ to Japanese Yen |
152.270 |
151.067 |
UP 0.8% |
| UK Sterling £ to Aus $ |
1.93159 |
1.93107 |
UP 0.03% |
| US Dollar $ to Euro € |
0.699178 |
0.685149 |
UP 2.0% |
| US Dollar $ to Japanese Yen |
93.6300 |
90.5534 |
UP 3.4% |
| US Dollar $ to Aus $ |
1.18772 |
1.15762 |
UP 2.6% |
| Commodities: |
|
|
|
| Nymex Crude oil |
$69.29 |
$67.70 |
UP 2.3% |
| Gold |
$1,006 |
$995.80 |
UP 1.0% |
You may be saying – but I do involve my employees in my business…but do you?
Of course your employees to do the work of the business and the employees, with the right direction, make any business great as it expands, but there are not many business owners that involve their employees in helping with important decisions.
I would suggest that you ask them their opinion on various expansion ideas or where you are looking at introducing new products or services get their input on this.
Also, ask them how to improve on customer service, especially those employees that are on the front line, as it were…as these are the ones that are dealing with the customers directly and are therefore likely to give you some of the best feedback.
Never be scared of getting the opinions of your employees and remember that most people work better with their own ideas than on ideas that have been forced upon them from a-high!
A good way of doing this is to have regular group meetings with your employees…if you are a small business then there is no reason why this could not involve all employees of the business, but you may have to do this after hours otherwise there will be no one to run the business whilst you are all in a meeting. I would suggest putting on some drinks and eats in the meeting and make it fun and enjoyable so that they all enjoy the experience…thereby you will get the best out of them.
If your business is a larger company with too many employees to meet in one sitting, consider breaking this up into smaller meetings and perhaps get someone to volunteer from each group meeting to come forward to meet together to discuss their individual ideas.
The benefit of this system is not only will it produce great ideas to take your business forward, but it will also help to make it more independent of you the business owner.
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