Here at in-business.org.uk we would like to wish all of our readers a very Merry Christmas and a Happy and Prosperous New Year.

If you are looking for some ideas on New Year’s Resolutions then these might help…

1. If you have an idea for a new business and if till now you have been putting it off…make a resolution to commit to taking your business idea forward in 2010! Read about How to Start a Small Business.

2. If you are bad at doing your filing (Like me) then how about promising to keep up-to-date with your filing in 2010.

3. If you have been thinking about ‘Writting a Business Plan‘ and a cash flow forecast for your existing business and been putting this off…stop putting it off and get to it! Make 2010 the best year ever for your business…write a business plan and set your business in the right direction – Don’t fail to implement!

4. If you are too busy doing things in your business and doing what I consider ‘Working In’ your business…promise to start delegating in 2010 and start ‘Working On’ your business in 2010. Learn how to delegate task in your business!

5. If you are not sure about where your customers are coming from and you do not measure your advertising costs versus your new client inflows…consider s New Year’s resolution of starting to ‘Measure and Manage’ your business. Also consider starting a ‘Marketing Calendar’. Develop your business Key Performance Indicators or KPIs.

Whatever your New Year’s resolution for 2010 and whatever you do in your business

If you are looking to for advice on creating a cash flow forecast then here are a few tips and pointers.

Firstly you need to distinguish between what is ‘Revenue and Expenditure’ and what is ‘Cash Inflows and Cash Outflows’.

Let me explain this by way of an example:

When you raise a sales invoice to one of your customers there are differences between how this transaction affects profit and how the same transaction affects your bank balance and when.

Let’s say you raised the invoice on 28 November 2009 and the invoice was for £1,000 (net of VAT or Sales Tax). For profit and loss purposes you would include £1,000 in the November profit and loss account, which is very straight forward and quite obvious really. However, when it comes to recording the ‘Cash-effect’ of this same transaction you have to put a little more thought into how you record it.

Firstly, if you are a business that has to charge VAT or Sales Tax then the amount that you will receive (the Cash-Inflow) will be more than the £1,000. If the rate of VAT or Sales Tax was 15% then the amount of ‘Cash’ you will receive into your bank account will be £1,150 and not the net amount of the invoice. Also, not all customers pay you straight away and in some cases customers can take months to pay you. So let’s say that this particular customer pays you in 30-days time, which would be on 26 December 2009 (forgetting for the minute that this is in fact Boxing Day!). Therefore for cash flow purposes you would include £1,150 in the December cash flow forecast – giving you a timing difference.

Finally, you would then need to include the £150 as a ‘Cash-Out’ part of your cash flow forecast when you paid the VAT/Sales Tax to your Government, which might not be until February 2010.

There are other complications that might come into play with your profit and loss versus your cash flows and you will have a similar complications associated with business expenditure and how these interact with ‘Cash-outflows’.

The best way to prepare a cash flow forecast is to spend a bit of time planning it and reviewing what actually goes on within your business. You will also need to consider any capital expenditure you might be planning and how this impacts on your cash flow and how the depreciation of these assets impacts on your profit and loss account.

Article by Russell Bowyer

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 worth 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 not 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.
2. Reduce your direct and indirect costs and overhead expenses.
3. Consider increasing your prices and especially to your slow payers – see Bowraven’s “Profit Increase Software“
4. Review the payment performances of customers and be more selective when granting credit – start using a credit report company to check the credit worthiness of potential customers.
5. Consider up-front deposits or multiple stage payments – approach a loan company to advance the money to you and offer credit terms to customers.
6. Reduce the amount of credit given to customers and change your payments terms – i.e. reduce the time allow for customers to pay.
7. Introduce factoring or invoice discounting to accelerate receipts from sales.
8. Make sure that your sales invoices are raised as soon as the work has been completed.
9. Offer early payment discounts and consider introducing late payment charges or fees.
10. 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.
11. 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% of non profitable product lines. Be careful when do this, as it might be that certain products are reliant on others, in which case they may be ‘Loss-Leaders’.
12. 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.
13. 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 write-offs under review.
14. Sell off or return obsolete/excess stock (inventory).
15. Defer or re-stage all capital expenditure.

Planning these changes and which ones work best for your business can be done using our tried and tested Cash Forecaster.

Post by Russell Bowyer

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!

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.

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.