|
Welsby Associates
Your part time finance director |
|
|
| |
|
|
|
|
Top 10 Finance Tips
1. Planning
Plan ahead! I cannot recommend the following viewpoint, given by a disorganised businessman… “The nicest thing about not planning is that failure comes as a complete surprise, and is not preceded by a period of worry or depression”. However, I strongly recommend the alternative of regular planning and reviewing how the business is operating. Basil Walsh said “If you don’t know where you are going, how can you expect to get there?”
2. Ensure you have a Business Plan for the next 2 (and preferably 3) years
It’s important to know what business you are in, who your competitors are, what plans do you have to develop the business and what resources (people, equipment, capital and cash) you will need. Include budgets comprising of Profit and Loss Accounts, Balance Sheets and Cashflow/Sources and Application of Funds Statements.
3. Share your Business Plan and results with your bank manager
Always obtain more funds than you expect to need. Nobody likes bad surprises, so keep regularly in touch with your bank manager or funder. It’s always better to ask for more funds than are needed, than to have to return to your funder and ask for more.
4. Monitor the progress of your business regularly
Daily
Cash/Overdraft balance at the bank
Sales keep running totals of invoices and credit notes
Weekly
Debtors chase slow payers, enforce credit terms
Stock Levels are all stocks selling and is there any obsolescence
Monthly
Sales full analyses of customer, items and prices
Margin cost to business of goods sold for resale
Overheads analysis of all expense items, including accruals
6-Monthly
Reforecast the out-turn for the year
Annually Budget in the same detail as the management accounts
Business Plan on a rolling 3 year basis
5. Write up your books regularly - at least weekly
Although it appears to be a perpetual chore, if you keep your books up to date each week, it will really save you time later on. At the worst, queries are only one week old! You will need a bookkeeper. Ensure that you are always aware of the current financial situation of the business.
6. Debt collection
A sale is of no use if you’re not going to get paid for it. Don’t sell to people who don’t pay! If a customer has a history of poor payment, consider future supplies only on a cash upfront basis. You can add something along the lines of the following to your invoices and statements. “ABC Ltd reserves the right under the Commercial Debts (Interest) Act 1998 to charge interest on late payments as defined in the Act at a rate of 8% above the Bank of England base rate". I have found that this can focus the mind of the most hardened of late payers.
7. Business continuity
Have you ever thought what would happen if you were unable to work for (say) three months? How would the business cope? Is there someone who can mind the business and take on your responsibilities? If the answer to these questions is “No”, then perhaps now is the time to plan some short term succession planning.
8. Profit does not equal cash
Profitable businesses can run out of cash! Just because a business is making a profit, that does not always mean it is increasing its bank balance, or reducing its overdraft.
9. Cash is King!
Cash is the most important item for every business to monitor. This can be checked daily via your bank’s website.
10...and finally, some thoughts for the day…
Failing to Plan is the same as Planning to Fail
If you’re in a crisis, don’t ignore it – deal with it now!
Viability = Credibility = Approval
If you don’t A-S-K, you won’t G-E-T
If you always do what you always did, you’ll always get what you always got
Seen over the entrance to one of America’s leading companies is a sign which reads “Our job isn’t making steel, it’s making money”. Making steel was their means to achieve this.
What is your business’ most valuable assets – and yet are never shown on any balance sheet? Your satisfied customers.
www.welsbyassociates.co.uk
|
|
