Cash flow forecasting is made easy with Bowraven’s Cash flow forecast software.

Good cash flow is the key to a ‘Companies Health’ and it is the ‘Life Blood’ of all businesses.

Planning and forecasting what will happen and when it will happen is tantamount to a successfully run business, so having the tools to optimise those cash flows and being able to forecast cash flow and to run ‘What if’ scenarios with your ‘Cashflow Projections’ is key.

Having easy to use cash flow forecast software is a necessary tool for business owners and for accountants working on behalf of their client to produce professional cash flow reports.

When making decisions about how to optimise future cash flows, having well prepared cash flow forecasts to review and present to your management or to investors or the bank where your business is looking to raise finance, is a must.

Bowraven’s Financial Forecasting Software is known for its ease of use and it takes the hassle out of preparing essential cash flow forecasts. Our software will save you time, help you to get it right and avoid the need to create Excel cash flow forecast spreadsheets from scratch. Use our Cash Flow System to beat your cash flow crisis and to produce a cash flow forecast in minutes.

This Cash Flow Forecasting Software provides the solution for your business to prepare one to seven-year cash flow forecasts with professional looking reports.

In one of my businesses we have just set up a new employee bonus to the management team and this has been well received.

The title of this post was to emphasise a ‘Bias’ towards a bonus rather than fixed salary to your staffs - I would recommend this as a recession beating tool.

I was not sure how the team would take it, but they were over the moon and thank us for being so generous, which is interesting because by giving them a bonus (which was a percent of gross profit) they were focused on growing the business, which would benefit me anyway.

The psychology of giving a bonus instead of a salary rise is an interesting one and should be embraced by more business owners, especially in the present economic climate. Employees might still be looking for a pay rise despite problems and things being tough, so instead of giving them a fixed pay rise which would represent yet more fixed cost to your business, give them a reward that benefits them when the business benefits.

Of course this was only announced today, so I cannot report on how well this will go and to what extent it will affect my business going forward, but if the reaction I received today is anything to go by then I expect positive results.

If your business is struggling and you cannot afford to pay your staff higher salaries, then by replacing salary hikes with a bonus scheme the employees will not be paid unless things improve. So by definition you will be paying the extra salary out of extra profits. I recommend a ‘No-Cap’ bonus, which means that it is open ended so no matter how much they increase the profits the staff get paid a percent of every part of the increase.

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

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 came across this video which explains about the five mistakes an entrepreneur makes in business.

We all make mistakes and if we are smart we learn from those mistakes and move on. However, if we can learn from other people about mistakes not to make in what we are doing then even better – so if you run your own business and are already an entrepreneur or if you are considering setting up in business then I recommend you watch this video, as it has some good tips for you.

Five Biggest Mistakes That Entrepreneurs Make

Turn-on your television or pick up a newspaper and all that is reported right now, apart from the present swine flu problem, is the “credit crunch” – falling house prices, rising unemployment, businesses going bust, repossessions, bankruptcies and more…

So what should small businesses do?

Well this depends on whether you see this as an opportunity or a threat. There are no doubt certain businesses that will find these times more difficult than others, for example, only today there are reports about how the number of unemployed lorry drivers has gone up almost 5-fold since this time last year.

Where businesses are selling less and therefore resulting in a less of a need for transport, then transport companies will see a dip in demand and as a consequence might need to make redundancies. So I accept that times are tough and even more so for some – take solicitors and estate agents – with the dramatic fall in house sales their business income relating directly to house-sales will have fallen off a cliff over the last 12-18 months. However, take an estate agency – if they don’t already do so, the estate agent should consider moving into property rentals, as people are resorting to renting their property instead of selling.

By looking at the present economic situation as an opportunity and to start looking at ways to make efficiencies within any business you should be able to survive and along the way make more small business profits – doing nothing is not an option and will result in a business failure. You can ask your staff to take a pay cut so that they help in the survival of the business and you can then start to look at other ways in which the company can make profits from existing customers, by looking at other product lines that compliment your existing ones.

I suggest that you look at putting together a meeting with all your staff with the main or sole purpose of getting ideas from them on how to move the business forward. Before the meeting make it clear to all staff what the purpose of the meeting is and that it is to be a constructive review of the business and its activities.

The benefit of doing this with staff is that they all know the business and when you get a group of people together you end up with an “Idea Snowball Effect” in other words – one person might suggest one thing, which in itself might be a good idea, but if not it might lead someone else on to an even better idea – and so on…

You might even want to offer incentives to staff for the best ideas and for those that start producing results or alternatively, place a marker in the sand of where profits are now and then offer a group bonus based upon any profit increase whereby things improve.

Another way to move things forward is to ask your customers for ideas and feed-back. You can organise a “Client Forum” whereby you invite a number of clients in (I recommend 10-12 customers) and sit them in a room and ask them for feed-back on your products and/or services. It is amazing what can come out of this type of meeting, which can ultimately lead to providing a better service to your clients and they might even give you ideas for other products of service – thereby increasing your business profits!

Whilst improving profits – don’t forget to keep an eye on cash flows – it is all very well increasing your business profits, if you don’t get the money from your customers and keep cash in the bank.

10 ways to save money in your business and make your business a lean mean fighting machine!

In an economic slow-down it is time to cut costs!

When things are going well and saving money is not at the top of the agenda we can all let things slip and not pay close attention to cut costs. With the credit crunch still biting the majority of businesses still I though it would be good to help focus on where money can be saved.

1. Bank charges

If you have been with your bank for a number of years and many people tend to be very loyal to their banks, for some reason. Always remember this, if times get tough, the bank will be the first one to kick you out on the street, as their decision is based purely on a commercial basis without emotion. So it is always good to have a look at the competition and see what deals you can do with other banks and the bank charges you pay or save.

2. Bank loans

You might well have banking finance in the company be it a general loan or overdraft or it might be in the form of a mortgage on a business property. It is always worth while checking to see if you can get a better rate, especially right now with bank base rates being so low. The rate your are already on might not take account of the full rates reduction, so by moving lender you might get a better deal or even a very good fixed-rate deal.

3. Company credit cards

If your business uses credit cards then these will have an associated cost, be it an annual fee or the fee they charged if you use it abroad on business. Check with other banks how much they charge for a similar service, as you might be able to save some money where the cards are used in a significant way.

4. Pay-down your mortgage

Where interest rates have dropped so much your mortgage payments will have dropped by a large percentage. However, if you can afford it, why not keep your mortgage payments at the level they were before so that the capital element of the mortgage gets paid down faster.

In the long-run this will significantly shorten the length of your mortgage and reduce the amount of interest you pay over its term. Also, at a point when rates start to rise again, the amount you owe will be that much lower so the repayments at that point will be lower.

5. Review your supply chain

You might have ordered your stationery from a certain supplier for some time now and it might be that there are other companies out there that offer a better deal. There will be companies eager to get your business and might be willing to give you good account discounts to get your business.

Equally, your existing supplier might well give you a better discount if you ask them and more likely if they know they might loose your account. This saving tip applies to all of your supplies and where you are a manufacturing type business and you purchase goods to sell, then if you can source cheaper suppliers for your business, you will improve your gross profit margins.

6. Cash takings

If you are a cash business you might already try to minimise the amount of the cash you bank and instead use it to pay suppliers, employees and so on. Banks charge you significantly to bank cash so if you can limit how much you pay in this will reduce these costs. You might also want to look at other ways of banking your cash, for example the UK’s Post Office has always been a cheaper solution for banking cash, so it might pay to look around for banks that charge lower “Cash-Banking” rates.

7. Save money on your fuel bills

Even during this economic slow-down the cost of energy has remained relatively high so it would pay you to search around for a better deal. You can normally search online for Energy Comparison Sites so that you can cut your fuel bill on gas and electric. Sometimes by combining the two into one bill and by paying by direct debit will save money – so take time to speak to different companies.

8. Cut your phone bills

For some businesses the phone bill is one of the high costs and by switching supplier can reduce this cost. Look at getting a deal whereby the landlines you use are linked in some way to your company mobile phones so that calls between the office and the mobiles can be free with certain deals on the market. Consider incentivising your employees to switch to your own service provider where call-charges are cheaper when made between the same supplier and the business makes a significant number of calls to employee mobiles.

9. Accountants fees

Accounting and professional fees can be a significant cost to the business and it is always worthwhile reviewing not only the cost of this service, but also whether the accountant you use is saving you money. If you have a good accountant and tax adviser, they should be able to come up with tax-saving tips for your business and if you change the new person might see something that your old accountant has missed.

Also, try looking for an accountant that this prepared to offer a fixed fee – you end up paying too much to accountants or solicitors that charge by the hour, as you are paying for their inefficiencies if you pay them by the hour!

10. Company car policy

Review your company car policy and how often you change your vehicles and for what level of car you buy as a replacement. Also, consider the fuel type your company vehicles use – there are obviously petrol versus diesel and now you have the new types including electric cars and a combination fuel type car.

These are just 10 ways to save money in your business, but if you start to think this way then I am sure that you might well come up with your own ideas to help reduce costs in these difficult times.

A good video to watch if you are considering starting or buying a business or if you have a business and you are looking for some inspiration.

The BBC’s TV series Dragons Den has found and inspired many successful business owners and in this first video the focus is on Duncan Bannatyne – Success stories in business.

Getting the money for starting a business is a stumbling block that many budding entrepreneurs face at the out set.

The first question to answer is should I buy a business or set up a business from scratch with each route having its own complications from a fund raising perspective. If you are starting out from scratch you have the added problem that you have no track-record in business and the business itself will have not trading history.

However, if you are looking to buy a business or perhaps set up a franchise then this is a slightly different proposition in that and existing business will have a trading history and franchise are liked by banks because they are a know quantity. You do still have the slight problem that you have no business track record, but this can be overcome with a sound business proposal.

There are many ways to find finance using No Money Down principles and in addition to this there is also the Enterprise Finance Guarantee (EFG) (Formerly the Government Small Firms Loan Guarantee Scheme, SFLG) to secure any loans, where you don’t have any of your own security. However, the proposal must be robust that would get a loan from a bank except for the lack of security. The EFG is for small businesses with a turnover of less than £25 million in the last 12 months and can be for existing businesses as well as start up ones, so long as they start to trade in the near future.

For a list of the banks that lend using the EFG you can visit the BERR – The Governments Department for Business Enterprise & Regulatory Reform.

The EFG will guarantee loans of between £1,000 and £1,000,000 and will only provide security for 75% of the loan and comes with a 2% premium payable to the BERR on the balance of the loan on a reducing balance basis. However, this premium has been reduced to 1.5% of the loan outstanding for 2009. EFG loans can be used to replace existing overdraft facilities or provide new finance for working capital, equipment and business expansion, with a minimum term of three months and a maximum of ten years.

Click here for a list of EFG restrictions

Every business should have a realistic and working business plan which should not only be prepared when the business is starting up or at a time when finance is being sought.

A business plan is like a road map for the business and is a set of directions to help it get to where it plans on going. A business might well get to where is wants to go without a business plan, but it will likely take a lot longer and there is always the danger that it will get lost along the way. Think about it this way – if someone asked you to navigate to a place you had never been before without a map or the modern Satnav, you would be able to get there, but it would take you a lot longer without the map.

So in short a business plan is a written document setting out the businesses short to long-term goals and objectives. The plan should include a description of the business together with details of the people behind the company. It should also include profit and cash flow forecasts and details about the market the business operates within together with details of and an understanding of its competitors.

Having said previously that a business plan should not only be prepared at a time when the business is looking for financial help, if you are preparing the plan for this purpose, then the plan might need to take this into consideration in how it is prepared. So the plan will need to be adapted and altered to suite the audience it is being presented to.

There are many benefits to creating a business plan from an in-house view point, which are:

• Focus your attention on the marketing and development of the business.
• It will help you to make sure your business is run efficiently.
• Provide you with a plan of your finances both in terms of profit/loss and cash flows.
• Help you to keep focused on growing the business.
• To keep your attention on the time-lines and keep you to the “Path” you have set for the business.
• Help you to avoid problems and potential pitfalls.

So what should you include in the business plan?

An executive summary

I suggest in this section you explain to your audience the fundamentals of the business – imagine if you would that you were in a lift with someone that has just asked you to explain your business between stops. What would you say to this person to get the message across in a compelling yet clear and concise way so that this person is under no illusions about what your business is about.

If your audience is a bank then I would advise you to include in this section how much money you are looking to borrow and what this money will be used for, but more importantly what this money will do for the business meaning that the money will be repaid.

General company description

In this you need to include details about the type of company you have and owe owns it, who are the directors, if it is a limited company. Give the reader a bit of the company history, like when the company was established, how many employees it has and any significant milestones that would show your company off in the best light.

Your products and services

Describe your core products and services and how each of these contribute to the company. Explain the split of the income between your services and/or products and how profitable each one is. Explain how you intend to expand the business and which of your lines will be expanded and whether you intend to add any new products or services to capitalise on your existing client base.

Your marketing plan

Take time to think about how best to market your business and look at new ways in which you could exploit existing and potential customers. Brain storm some ideas within the company and then crystallise those ideas within this plan. Consider doing some market research and convert the information you have found into meaningful information for the business and how this can be used to the benefit of the services your provide and products you sell.

Knowing your total market size can really help you to know how much you can expand your business – there is no point in having massive expansion plans for a business that is in a market where there is no such potential or if the market is in decline.

Consider what your company’s strengths are and how these can be used to your advantage against your competition. If you have not already done so work out what your company’s USP (unique selling proposition) is and if you don’t know or don’t have one, then this is the time to work this out. What you are looking for is to be able to answer the question asked by a potential customer “why should I buy from your company and not from Joe Blogs down the road?”. Do not get drawn into a price war or the all too easy answer to say “we are cheaper than them”, because if you simply compete on price and your competitors match your prices, then this will leave you no room to move other than reducing your prices still further!

Operational plan

Expand the information on how the business runs, the premises and whether you own it or not, the length of the lease if it is leased. Details about your staff and how many are in each department and how this will change over the next 12-months and into the future as the business expands.

What systems does your business have in place to help make the business run smoothly and are these systems to be up-dated or modified. Include in these details about your IT systems and your operational systems like stock control, production control, quality control and so on.

Consider your company’s KPIs (key performance indicators) which are financial and non-financial measures used to help an organisation define and evaluate how successful it is. A KPI is something you can look at to see how well you are doing on a particular area of your business and it is like have a rev-counter in your car. KPI’s are used to monitor how you are doing and whether the key areas of your business are moving in the right director or not.

The financial plan

Your plan should include a summary of the financials affecting the business over the next 3-5 years. In the body of the report include key figures like your company’s turnover, gross profit and net profit figures over the following 3-5 years. Also include key balance sheet figures like your cash balance, debtors, creditors, fixed assets etc., which any good cash flow forecast should include.

The full cash and profit forecasts should be included in the annex to the business plan so that the reader of the report will be able to see how your cash flows pan out over the next few years, and in the event you are seeking finance, the lender will be able to see how the loan is used and how this will impact on the business going forward.

So if you do not already have a business plan for your business then I suggest you think about doing so.