Help I'm running out of cash!….How KPIs and a Flash Forecast can quickly help to know how you are doing and get control….

A client rang me a couple of weeks ago and said “I persistently seem to have no money, I need your help. Sales are up but I’ve got no money”.

I quickly asked about a few areas which were directly relevant to the business:

¨      What are your stock levels like now compared to before?

¨      Are you paying other businesses quicker?

¨      Have you bought any large items of capital for use in the business recently?

¨      I then discussed a comment he made earlier concerning prices: what are your margins on sales. He confirmed that they had dropped

¨      I also asked whether he had increased spend on labour, marketing or on other overhead costs in running the business. I was advised that marketing spend had risen but everything else was static

I could quickly see that the Balance Sheet was under control but I wondered from the conversation whether the business was in fact losing money.

I next suggested he undertook the following actions to get a quick handle of the situation:

1.      Immediately run his profit and loss accounts from his bookkeeping software for the last few months and compare the costs to previous accounts both in terms of actual spend and in terms of % of sales and then look at recent monthly trends

2.      Then start measuring weekly the key numbers in the business, the KPIs, in this case – bank balance, sales, purchase costs, marketing & labour costs and compare these to year to date and prior year figures, both actual cost numbers and as a % of sales. Finally estimate fixed costs from past accounts, which shouldn’t vary significantly. From this a “Flash” result can quickly be obtained which if done well should be close to the actual result; “close” is enough for a Flash result

3.      Finally prepare a forecast firstly for the next month and then for the next year for these KPIs and the rest of the fixed costs to give a target to measure against for Flash and actual management accounts results. Before preparing management accounts, at the end of each month an initial Flash result can be obtained for that month and compared to the forecast

By using KPIs and Flash forecasts combined with an understanding of their Balance Sheet, a business can quickly gain information as to how they are performing and take immediate action to control an adverse situation. Why wait for management accounts to be prepared to know how you are doing?

Contact Jan to find out how we can help get quick control of your business performance
07890 239442

The tale of a worried VAT taxpayer

As I said in my previous blog I’m going to be telling you a few stories about how we’ve made a difference in people’s lives.

Lucas had ignored my advice to regularly check his VAT position so when we prepared his accounts he had sailed way over the VAT registration threshold. Since then he has had many sleepless nights trying to work out how he was going to pay this VAT. I kept talking to him though, kept him calm, got him VAT registered, a payment plan put in place with HMRC spread over 6 months and the penalty reduced by half for being helpful. He’s now in the good books with HMRC……

But I also kept telling him that actually in the long run this will help make him money; and to prove the point when I met him a few weeks ago and told him HMRC owe him £2,000 in income tax a smile spread across his face…he looked relaxed….He then told me that he was well on track to clearing the overdue VAT too, through the savings he had made following the VAT registration.

We then went on to discuss how we could put his wife through the business (for help with his administration) saving him another £1,000 in taxes each year………another smile spread across his face.

So it’s not a bad life being an accountant…….we help make people happy!

Getting focus on what you want, for a better life

Carrying on with our stories…….

Steve and Robert were fed up. They were both working long hours and making very little money. They wondered how they could get out of this trap.

I wondered if I could help them. They agreed to a business strategy review.

We spent two half days discussing where they were at the moment and ideas they had to improve things and after discussing various options and much heart searching, they agreed on a plan of action with deadlines and responsibilities.

The plans were implemented, some worked, some didn’t but within 12 months Steve and Robert had transformed their business. They had cut out their low ticket project work for local businesses and refashioned their business to concentrate on larger project work: they also increased their prices and were more selective about the clients they take on. The end result, much higher profits and less hours working; they were far more relaxed about their future and happier.

Through our uncomplicated strategic review process, Steve and Robert had got focus on a plan of action to move away from too little profit and working long hours to job satisfaction and the profits they wanted whilst working sensible hours.

For me, a very rewarding and fruitful few hours of help……

So don’t just think of us simply as your accountant. Use the years of business experience to help you and your business to greater success

The story of the strange VAT returns

A few days ago I met with a new client together with a VAT Officer to discuss the way the VAT returns were prepared by the client. Since moving to their new location they had been short of cash and although thankfully business was steadily improving, he was still short of cash every day. Every day was a battle….so the last thing he wanted was a VAT visit.

On talking through the strange figures that appeared on his VAT returns, we suddenly realised that he had been calculating the VAT on his sales incorrectly. In fact we worked out that it was possible that he had overpaid VAT by up to £20,000 over the last few years. Our client was delighted……..although there’s lots of more work to do and other implications to think through, this was a great outcome from a worrying meeting.

After meeting with the VAT Officer we then updated on things with the client and they advised that they realised that there were entitled to more on their tax credits (which I estimated to be at least £2,000pa). This was on top of the fact that we had recovered £8,000 on unclaimed tax credits in a previous year and the already £9,000 per annum new ongoing tax credits claim we had put in place for them. This had made a massive difference to keeping their business afloat.

Next we plan in the next few weeks to sit down and talk about how they can make more money though their business……..I’m sure there will be far more opportunities to help make even bigger differences there but that will be another story.

Making a big difference in people’s lives………..

Working as an accountant might be the last thing you would want to do; I’ve got one friend who says that going to see his accountant is like going to see his dentist! But what if working as an accountant and business adviser could make a difference in someone’s life……..that’s what I can achieve through my work! Opportunities happen all the time to make that difference……

For example, through:

1.    Reducing someone’s tax bill or generating more tax credits,

2.    Giving peace of mind to a business owner who is worried about meeting the various compliance deadlines for accounts and tax returns, avoiding the risk of penalties,

3.    Simply saving business owners time letting them concentrate on doing what they’re best at, running their business, and

4.    Best of all helping business owners to understand their business better whether through historical financial or non-financial numbers (such as key performance indicators) or forward looking forecasts, business plans and strategies. Through this we give control and focus, in turn re-energizing the business team to achieve the future they want, whether it’s business growth, more profit or achieving personal goals

It’s a privilege to be working with our clients and very rewarding! Ok sometimes it can be a bit of a reality check when we tell you something you didn’t want to know but involve us in your business and see how we can make that big difference…….

So over the next few weeks and months, I’m going to tell you a few stories of how we have helped make a difference in client’s lives…

A profit improvement exercise can involve spending more money but still improve the bottom line!

When you think of profit improvement and accountants do you automatically think cost cutting?! Of marketing, training and staff – in fact anything of any long term value?

Well that’s understandable – in my previous incarnation as a Finance Director I had to play the grim reaper a few times.

In my first job as a FD we had a major “profit improvement exercise” – yes, we cut staff numbers and also other costs – we indeed slashed marketing! It was a mail order business and at the time we were losing lots of money; in fact, we learned later that if the exercise wasn’t successful we were going to be closed. For mail order now read eCommerce. It was our catalogue mailing order segments that simply weren’t performing…..by carefully targeting profitable segments only we saved huge amounts of money. In contrast we instead invested in a policy of sending out orders part complete and the rest of the order when we had it in stock. Previously we waited until the whole order was in stock and therefore “complete” before despatching the order. Our postage costs went up but so did our customer satisfaction and our profit – lower turnover/higher profits!

The business quickly went on to make a lot of money in the next few years.

In Sanders Geeson’s profit improvement exercises we not only look at overheads we also look at customer retention, getting more from each customer, getting more from your marketing, maximising production efficiency, managing your stock and debtors and buying better! And we help prioritise the important initiatives.

At Sanders Geeson we can help you come up with an action plan for saving you money and building your business!

Contact Jan on 07890 239442, jan@sandersgeeson.co.uk

Believe in Sustainability and improve your profits!

Like all accountants I believed that following a policy of looking after the environment and implementing “Sustainability” in a business, meant fluffy PR communications and lower profits! However I’ve seen the “light” and now see that having a sustainability agenda can mean real gains for your business in two ways:

1. Saving costs, and
2. Improving your top line sales too

How can this be achieved?

¨      The place to start is a review of all your energy and carbon consumption through an energy and carbon audit. This forms a baseline from which to identify improvements which you can make. Areas to look at include energy and water usage, IT hardware, printing and stationery costs, motor expenses and of course, material and consumable usage.

¨      What is your long term strategy? Does it include Sustainability as a key ingredient? Plan to make Sustainability a key goal in your business embraced by the senior team and make it part of your strategic growth plan

¨      Look at the way you do things: is there waste and inefficiency in your internal processes which is contributing to increased use of physical resources?

¨      Involve your team: tell them your ideas, and they will not only help to generate new ideas but also enthusiastically implement your plans, in turn helping to boost your business morale

¨      Communicate the message to your customers and other stakeholders in your business: spread the message and grow your business

¨      Measure your success: periodically review where you are compared to your initial audit

We can help you come up with a sustainability action plan for saving you money, building your business and in turn helping the environment!

Contact Jan on 07890 239442, jan@sandersgeeson.co.uk

How to improve your profits in 12 easy steps?

Improving profits successfully is a process. It needs a plan. And it’s not just simply about cutting costs but more importantly about your building your business for the future. Here is our 12 step plan:

1.      Do you know your plans for the next 3 years? Are they written down?

2.      Do you know where you are right now? What is your current performance? Do you know your key numbers?

3.      What plans do you have to retain the customers you want?

4.      Have you reviewed the effectiveness of your marketing?

5.      What plans have you got to gain new customers and improve conversion rates?

6.      How can you improve customer spend?

7.      Where there is perceived value in the eyes of your customer how can you optimise your prices?

8.      How can you maximise production efficiency?

9.      How can you manage your financial assets more effectively including stocks & work in progress and debtors?

10.   How can you manage your purchasing more effectively?

11.  Is your cost management as good as you would want?

12.  After costing and prioritising which profit improvement actions are going to be the most effective, pull it all together to produce an action plan and profit targets over the next couple of years, which can be followed up on a regular basis

Working with us through our profit improvement session, we’ll take you through these 12 steps helping you to improved and sustained profitability.

Want to know more?  Contact Jan on 07890 239442, jan@sandersgeeson.co.uk

“We’re making a profit but we’re still short of cash, how?”

Here are a few ideas and a solution........manage your cash flow

You’ve heard the phrase, “cash is king!” Well it’s true, although without profit there will be no cash flow long term.

Accepting you are making profit, you can still run out of cash. Running out of cash can kill a profitable business. How can this happen?

1.      You are owed money by your customers – how much do your customers owe you? Do you know? Do you keep an accurate and up to date record of the money they owe you and chase your debtors as soon as the money is due? Do you invoice promptly?

2.      Do you have a stock of goods or consumables not yet used in the business? Have you bought a lot of stock of goods for future sale or to use in making more things to sell? Do you use a stock of consumables in the business? If so, are they at the right level for what you need?

3.      Does it take you time to complete your service or make your goods for sale? If so, as you are preparing the finished product, are you being paid? Do you get paid in advance or as you go along?

4.      How much do you owe to your suppliers? In the opposite balance to the money that is owed to you, do you owe money to others? If so, do you take full advantage of the credit your supplier gives you? In today’s commercial environment it is acceptable to take up to one months credit but never take more. Do you know your average credit taken from creditors, in numbers of days taken? Is it more that your average debt period in numbers of days? Your aim is to make it higher

5.      Do you manage your cash flow? Do you know how much money you have in the bank every day? Do you forecast forward what cash you will have over the next 3 months and in particular over the next month? If you are in a crisis or are just starting up or growing very fast, this is a vital exercise. A simple spreadsheet will do the trick and explain to you where you could run out of cash and why, and allow you to plan and manage the position. Initially focus on the four areas above and if this doesn’t help, look outside for financial support. A cash flow forecast will give you time to put plans in place

Want help or want to know more?  Contact Jan on 07890 239442, jan@sandersgeeson.co.uk

10 ways to Manage Your Debtors to Improve Your Profits

1.      Do you credit check all your new customers to see whether they can actually pay you? Do you check them with one of the numerous credit reference agencies? This service is not expensive and if it reduces the risk of not being paid, it is money well spent. It won’t eliminate the risk of non or slow payment, but it will reduce it. And it shouldn’t stop with new customers; it’s worth updating the check annually on existing customers

2.      Set cautious credit limits for all customers; again credit reference agencies make this process very affordable with recommended credit limit levels. Let your client know about their credit limit along with your terms of trade. Don’t forget to state the terms of business on your invoices too. If the customer account goes over the credit limit, but them on stop and let the customer know

3.      Make sure you have a written order from the customer and make sure your invoice is accurate. Your customer will check every invoice in detail and if it’s exactly how they want it laid out with all relevant details, in accordance with the order too, it will be processed first time and if they are a large business you will be paid in accordance with the agreed terms. The customer will have no excuse for not paying you

4.      Always obtain proof of delivery or signed customer satisfaction with the service

5.      Invoice promptly. It’s a well known fact that the longer you leave it to invoice the customer, the less likely you will be paid!

6.      Keep your outstanding debtors lists up to date daily and review them weekly. Chase overdue accounts quickly

7.      Chase your overdue debtors systematically. Start by ringing and reminding gently just a few days after the debt is overdue, say 7 days; then follow up systematically. Keep a log of all your contacts and promises by the debtor. Quote these back in follow up calls. Be polite but persistent. Whatever you do don’t let it get emotional. When you issue warnings, keep your word and take action. If you use someone else to help collect your debts, make sure they are good at their job as good credit controllers are hard to find. If you find a good one, look after them!

8.      Stop the service once the debt starts to get long overdue. Let the user of your goods or service know that they are on “stop”, say 20 days after due date

9.      Consider factoring if debt collection remains slow. The big advantage of this form of financing is that it grows as the business grows. Confidential Invoice Discounting is as the title says confidential from your customers and is increasingly available to smaller businesses, although your sales ledger accounting must be bang up to date

10.  Remove the risk altogether, get paid up front! This can be done in a number of ways, including bank transfer, direct debits, standing orders, credit card payments or cheque up front. However make sure payment has cleared the bank for whichever method of payment is used. Talk to your bank to confirm

Want help or want to know more?  Contact Jan on 07890 239442, jan@sandersgeeson.co.uk

 “101 Ways to Make More Profits” by Steve Pipe, 2^nd Ed., now out of print, was the inspiration for the above article

The 11 key ways to make more profits

There are hundred’s of ways to make more money; here are a few key ones:

1.      Thing long term and start planning to make more money. Profit improvement is a process and needs planning. Do you know what you plans and goals are? It is surprising how once you know where you are going, you are more likely to get there. Don’t just wait until you are in crisis

2.      Don’t just cut costs and rush to get new customers, try to get more income from your existing customers: why don’t you sell more often, or increase the value to clients by selling more services. Surely getting more income from existing customers is easier and makes more sense from a customer care angle?

3.      Have you got the right sort of customers? Do they fit your future plans? Are you going for the right mix of customers through your marketing?

4.      Review your systems systematically, the way you do things. Document them in an overview chart to get the high level picture and make sure you cover all the key systems in the business: production, production administration and general administrative support including finance. Can you do things in a better way?

5.      Ask where is the waste in your business?

6.      Ask your staff. They run the business day to day and will know best how you can make more money.

7.      Involve the staff more in the running of the business. Do you keep your staff informed? Do they feel involved and part of your future? Do they know your “Purpose”, your “Why”, the reason your business exists?

8.      Don’t underestimate the challenge of implementation. Make sure you have a structured process to making the agreed changes happen

9.      Do you truly know if you are making money? Are your financial records up to date? Do you have up to date key financial figures and also management accounts? Do you monitor trends in financial numbers? With this detailed information, you know where to take action

10.  Prepare financial forecasts. You can use these forecasts to compare how you are doing to your original plans. The exercise highlights where things haven’t gone to plan and where immediate action is required.

11.  Benchmark your business. How do you compare to your competitors? So as well as monitoring performance to internal measures including previous performance and forecasts, it is more important that you compare to independent measures which you can get from benchmarking. 

Want help or want to know more?  Contact Jan on 07890 239442, jan@sandersgeeson.co.uk

The 6 Key Questions to Keeping Control of your Personal Finances

Few of us keep a regular eye on our personal finances. What are the key areas you should be watching out for?

1.      How often do you review your personal financial position?

You should do this on an annual basis. A great time to do this is at the beginning of each calendar year.

2.      How well protected are you and your family if you were to die or fall ill?

This is something everyone in work with a family thinks about constantly. What will happen to my partner/children? Another related question is what will happen to my business or my business partners (for the answer see business wills below)? There are in fact lots of different types of personal protection policies, varying as to the level of cover and cost. Income Protection is one type of protection which not many people are aware of, which covers you for losing the job you are presently doing and can compensate you up to your present net profit; it may not be as expensive as you think.

3.      What plans have you made for your retirement?

Retirement soon comes around. The earlier you start the better, but you probably do need to save more than you think to get the level of pension you want. Indeed do you know the level of pension you want? Is a pension the right answer? The answer to this latter question can vary with age. Have you considered ISA’s or other alternative investments for your retirement? If so, are these strategies right?

4.      How often do you review the performance of your pensions and investments?      

Most of us are guilty of failing to keep an eye on our investments are performing. Have you also considered how your pension is performing? In common with the answer to question 1 above, this should be done on an annual basis.

5.      Have you got a will?

Few of us want to give this any attention; it seems to be tempting fate, but the Intestacy rules can sometimes be unpredictable. If you have no will the Intestacy rules apply.

Have you thought about wills for your business? These protect you and your spouse and your business partners should you or your business partner become unable to work or die.

6.      Have you thought about inheritance tax?

Although the levels at which inheritance tax start seem high, they affect more of us that expected. Have you prepared a personal Balance Sheet? You might be surprised at the answer; it might make you feel good, but also leave you with an Inheritance Tax headache.

The importance of these questions can vary at different stages of your life; indeed, are you asking yourself these questions? Do you know the answers?

Lastly, don’t forget your own business. How would you like to exit your business? This is something you should be thinking about from starting up the business. If you don’t plan this, you could end up in the wrong place. Starting to think about this with only 2 to 3 years to go could be too late.

Why not have a chat with us, as we are completely independent; we don’t sell any financial service products.

We offer a review of your personal finances, the Wealth Tracker. Alternatively we can also help you put together your personal Balance Sheet. Knowing where you are right now and putting in a plan will help you feel in control of your future.

Want to know more?  Contact Jan on 07890 239442, jan@sandersgeeson.co.uk