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Cashflow Tips – How to Improve Cashflow in 30 days!

Cashflow Tips – Claiming Business expenses – Consider what you want to achieve

Cashflow Tips – How to Improve Cashflow in 30 days!

One of the services we help our clients with is teaching how to improve cashflow – and our aim is 30 days! – mainly how to get paid sooner is the top issue they face! A simple method we found is simply send statements EVERY FORTNIGHT – the majority of busy business owners and accounts people forget – you are not their priority.

Results we achieve –

  • Frequent reminders has cut accounts payable / debtors from 60-90 days to majority 30 days and fewer in 60 days! – nearly halved the average payment time in many cases!
  • Calls have been more than halved!
  • Regular email saves time, stress and cost! – The squeaky wheel gets attention!

But there are always the stragglers or those in financial stress that may not be their fault, and often they are a bit embarrassed to call to explain – so sometimes a follow-up call is needed.
And then there are the down-right determined to string you out (the old-fashioned attitude to lean on creditors (YOU)), or financially tight businesses that are only in to win themselves – sometimes they may become a loss.

Here are 5 other tips from Elan Pamensky at Dynamic Business

Cashflow is the lifeblood of any business and more SMBs have been destroyed through cashflow issues than from any other cause. The last thing you need is to be stressing about whether you have enough cash to pay your own suppliers when you should be running your business

1. Compare Your Budgeted and Actual Cashflow

When you made your realistic budget for this financial year, you predicted  your income and expenses so that you could use those figures in your planning. The purpose of this budget was to check whether your cashflow was on target and take action if it is not.

If you are having cashflow issues, you need to determine what is at the root of the problem – lack of income, out-of-control expenses, or late payment of accounts by customers are the most common causes. Once you identify the cause, you can do something about it, but it all starts with awareness.

2. Be Clear About Your Payment Terms and Follow Up

You’d be surprised how many businesses forget this step, and it’s one of the easiest ways to improve your cashflow. Clearly defining your payment terms at the start of your relationship can transform the speed at which you are paid, and it also gives you a chance to negotiate.

If you are asking for 7 or 14 days payment and your prospect wants 30, 60, or 90 days you have the opportunity to negotiate a higher fee in return for your concession on terms, and you have the opportunity to ask yourself whether this client is going to be worth working for at all. This also puts you in a much stronger position if they are late paying your invoices because you have already had a discussion about the terms.

Once you have established the terms of payment make sure you follow your clients up quickly and professionally when they are overdue. This increases your client’s respect for the value you deliver, and helps you get paid sooner

3. Invoice Immediately

Businesses that invoice weekly or monthly are more likely to have cashflow problems. If you invoice as soon as you complete a job the chances are you will get paid immediately … or at least on time because a client who has just signed off on a job is probably happy to pay (or at least schedule payment) immediately rather than having it hanging over their head as something to do.

Tradies are particularly guilty of waiting days or weeks to invoice, and often only invoice when they have a cashflow crisis, so using an app, or developing a system that allows you to invoice immediately is an excellent way to improve your cashflow.

4. Plan Ahead for Compulsory Payments

Set aside money as it comes into your account to pay your taxes, GST   and superannuation obligations. It’s best to put this into a separate bank account so you are not tempted to think of it as ‘available cash’ because it really isn’t available at all.

I’ve lost count of the number of business owners who thought they were having an incredibly profitable year, but who discovered that they had forgotten to set aside enough cash to pay their legal obligations and were suddenly plunged into a cashflow crisis in June or December.

5. Consider Ways to Reduce your Stock Without Affecting Delivery

While many businesses need to have a certain amount of capital tied up in stock so that they can provide efficient and timely service, it’s always worth revisiting your stock levels. From stationery and office supplies to spare parts and widgets your goal should be to have enough to operate your business without interruption, but not too much.

Holding excess stock has an effect on your cashflow as well as on your expenses (warehouse and office space) so it’s important to determine the right levels for your business, and to control it carefully. Lower stock levels also make stocktake easier to manage.

In summary, if you implement one or more of these cashflow improvement methods you will find that the additional cash you have available at any time will increase, and you will also be able to look ahead and see when cashflow problems are likely to occur so that you can work around them.

Need help? Not sure? Call for FREE 30min advice / strategy session today!

Call and you also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!

Email info@accountkeepingplus.com.au or call 0407 361 596 Australia


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Cashflow Tips – How does Team-Building affect the Business Cashflow game?

Cashflow Tips – How does Team-Building affect the Business Cashflow game?

Cashflow Tips – How does Team-Building affect the Business Cashflow game?

Did you realise the effect of your team on your cashflow and profitability – and how team-building affects your business cashflow?

You know it when you get bad service from a business from a low-caring shop assistant – did you enjoy the experience so that you will go back? Unlikely!

YOUR team is an important, dynamic unit working together to achieve success in accomplishing a goal.

So – what determines how effectively a team will work together?

Lots of things. To create an autonomous, hard-working, high-producing group of individuals is challenging, and there are many factors that will influence your team’s success.

Here are 6 considerations to help you get started.

1-   Begin With the Right People

Know what you are looking for. When recruiting to your team, look for candidates who match your organizational culture. If you’re adding to an existing team, you might consider getting team members to help with the selection of a new recruit. While group cohesiveness has an effect on group performance, any group that works productively will suffer less turnover because they have enjoyed success. Look for people who will help to balance your team professionally.

2-   Be SMART About Goal-Setting

Without goals, teams are aimless. Prepare your team for success with a clear objective, and be sure to attach a value to the goal. Without seeing the value in the work they are doing, a team will lack the motivation to succeed. In goal-setting make your goal SMART:

  • Specific: Your goal must be well-defined so that the team’s direction is clear. Ask: Where do we want to end up? What steps will we need to take to get here?
  • Measurable: In order to measure their degree of success, a team needs precise objectives (amounts and dates). Be specific. If you describe your goal in general terms, such as “Increase sales” without indicating by how much or by when, it’s unlikely you’ll get the results you want.
  • Attainable: Be realistic. Aim too high (set a goal that your team has no hope of achieving) and you will only demoralize your team and eat away at their confidence. Make sure to state how and why you think a goal is attainable.
  • Relevant: Goals should be aligned with your vision of success, and relevant to the direction you want your team to take.
  • Time-Bound: Success will come that much quicker if you have a deadline.

Arrange to have your team revisit their goals regularly. The pursuit of achievement is ongoing, and reminders will help to keep things on track. Encourage open discussion about the team’s progress.

3-   Define Roles Clearly

Without goals, it’s impossible to establish meaningful, valuable roles for team members; in their absence, team member accountability becomes an issue, as do overlap and time-wasting. Clearly defined roles make it easier for each team member to set their own goals for accomplishing work effectively and for making a strong contribution to the larger goal. It is important that each team member accept the role and responsibilities of their own role, and those of their counterparts. You might consider explaining why each team member has been selected, so that their value to the team is clearly established. Clear roles help to:

  • Identify knowledge, skill and capability needed (helps you hire the right people)
  • Determine what resources and strategies are required for success and determines who will be sharing these (helps you get the proper tools to the right people)
  • Eliminate confusion, establish boundaries, and reduce overlap (so a member can focus time and energy on learning/ performing a specific task)
  • Identify any weakness that threatens efficiency and any need for training, support or reassignment

Perhaps the most important role on a team is the team leader. A quality leader who will value the ideas and opinions of its members and hold team members accountable will influence engagement (and efficiency).

4-   Build an Atmosphere of Cooperation

Efficient teams co-operate. In this environment, team goals are of utmost importance and team members support each other in working toward these goals. A member will be measured by their contribution to achievement. Have processes and protocols in place to promote co-operation. Consider the following:

Team charter: A charter defines how work will be done. It is created by the team, for the team. All members should be expected to contribute. The team charter addresses how work will be done. It deals with topics such as:

  • Purpose (A team that understands how a job will align with your organization’s key objectives and strategies is more likely to produce exceptional work. Reinforce corporate values, and business objectives.)
  • Duration and Time Commitment (Ask: How long will this take? What time is required?)
  • Scope (How big is too big?)
  • Stages of development (deliverables)

Communication: This is the most important factor in successful teamwork. The most effective teams exist where members are able to share information and expertise openly with their team, and with their organization as well. Personal expression must not be undervalued. (Points are listed to consider…)

Conflict resolution: Conflict is part of learning to work well together. It is powerful, and can contribute to a team’s success or be its undoing. Deal with conflict quickly. Where a team is relatively uniform in experience, problems may be resolved more quickly than where a team’s members differ widely in experience and approach to problem-solving. If team members cannot resolve an issue, they should have prompt guidance. Encourage openness, and have a method of feedback so that concerns can be brought to your attention. Be responsive.

Team-building: Enable your team to perform their job well. The degree to which you need to invest in team building depends on the size of the team, and member turnover. The dynamics of a team will change with the coming and going of members, and in either circumstance, you want your team to adjust, and continue to be productive. Help them build strong team systems and processes so that work goes on uninterrupted.

5-   Define Expectations

Performance expectations are, basically, the ‘Rules of Engagement’ for team work. They govern professional issues. Be clear about what contributions are expected from individual team members, and consider presenting these expectations to each prospective member during their interview to help assure that you will be working on the same page. These expectations should be laid out in your organizational policies and procedures.

Team expectations should be concrete and directly related to the achievement of team goals. They define how a team will work to achieve their goals.

Expect team members to:

  • Contribute (do their work)
  • Communicate with each other
  • Cooperate (support each other)…

It is very important to the success of your team that you enforce expectations. Make sure that you treat everyone fairly (without favoritism), and that you welcome and accept observations from team members about performance issues. Poor performance must be effectively addressed for team members to feel supported, and so to manage potential conflict. Team members must be held accountable for achieving goals and meeting expectations for the team to be effective.

6-   Recognize Good Work

Effective team members perceive their service to the team as being valuable to their organization, and to their own careers as well. Reward the results of their efforts. To attract and retain motivated and effective workers, your organization must invest in a culture that promotes improvement, and has a means for capturing individual contributions. Recognize and reward individual successes and team successes as well. Learn what keeps your team members motivated. You might consider the following:

  • Profit-Sharing (Share the wealth!)
  • Skills development (training, conferences, webinars)
  • Opportunity (promotion)…

Never let good performance go without recognition, and follow-up. If you or your team see good performance from an individual contributor, they should be sure the individual is both recognized and rewarded.

Effective teams benefit from front-end investment. Spend time structuring a work environment to foster success, and you will be more likely to see your team flourish. Recognize that you are part of the team (even if you are apart). Invest in your relationship with team members, and seek to build trust and loyalty by being accessible, supportive, and responsive. Reward good performance and deter poor performance. Review processes and procedures regularly. Take comments and criticisms, and allow yourself, and your team to grow towards success.

Condensed from http://www.corporatechallenge.com.au/blog/how-build-effective-workplace-team

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Cashflow Tips – Claiming Business expenses – Consider what you want to achieve

Cashflow Tips – Claiming Business expenses – Consider what you want to achieve

Cashflow Tips – Claiming Business expenses – Consider what you want to achieve

We see many business financial situations, working on the business books in different industries. Commonly the owner is told by fellow business owners and often accountants, to be claiming business expenses as much as you can to reduce profit and pay little tax. That is sensible, and the Australian Tax Office (ATO) website encourages tax minimisation that is lawful (but not tax avoidance by manipulation if false claims etc).

However, while assisting with the debt collection and client payment allocation to correct invoices (one service we provide – we tailor to what the client needs) and while working on one client’s books, I notice quite a few personal transactions like F&V and Meats, that they want to claim as staff/office expenses, but aren’t aware that it looks like the accountant is allocating them as NON-DEDUCTIBLE – it would be hard to justify as “office or staff” amenities to the ATO so often as well!

Additionally, IKEA and paint and Bunnings can be legitimate office Repair and Maintenance, but if purchased while your business is closed, it could look suspicious.

So be aware that it looks like the accountant is not going to claim some things for you any way, and that is probably safer for you also, in case of ATO audit.

Cashflow Tips – Claiming Business expenses – Consider what you want to achieveOften, really isn’t much value to try claiming as much as possible as business expense (from what I have seen other businesses do) and as we often hear them say they do.

WHY?

  • If there is an audit it can be denied and reversed and fines imposed – the ATO website is clear that only business-related expenses are claimable
  • The other thing is low profit can inhibit funding if required in the future via bank overdraft or venture capital, or partner investor – Not all will really look into the real detail. And if you want/have to sell, you need to show 3 good years of good profit – otherwise who would want to buy it?
  • Doing a year-end” Directors bonus” to reduce profit shows a clear easy message to potential bank or financiers. I have done that in earlier years – it clearly says you are profitable, but reduces the profit legitimately, so less company tax needs to be paid, and can be done declared after the year end!

It needs to be discussed with the accountant, but even they miss-understand the disadvantage of claiming lots of expenses to reduce profit, and the harm to your future financing and wealth potential.

I have seen that if you want to borrow or expand, it is better to have clean accounts, and take bonus wages if extra Profit and money is there, as wages are fully deductible, and don’t need to be explained or justified as some transactions such as mentioned above, may need to.

And you will also know that a good wage for you and your wife is better when you want to re-finance or borrow for an investment property in the future. The brokers I work with (and even in my own situation this year) have a hard time explaining to lenders the true story – most do not understand business and Profit and Loss (especially “Extra expenses” claimed on the business)

Yes you need to improve your home, and you need to do that, but it doesn’t bring in income like an investment property will.

The quicker you access more property or other investments, the earlier you set yourself up for better wealth later, by passive capital growth.

I wish I had that shown to me 10-20 years ago, but no-one did, and I realise only a few see how it can work or how to make it work – owners and accountants alike.

You may be in a good position to be able to get an investment property with your incomes, and growing business turn-over. But if you load up non-business expenses it gives the accountant more work, looks like they may not claim it all any way so it wastes their time, it makes extra work for a broker to convince a bank you are very profitable etc so they are comfortable to lend to you as a low risk to them (which is what they aim for!)

So consider the bigger picture – you may be able to do more, but that is up to you and when you have the time/interest to look into it.

Just my observations of other business people and how most limit the possibilities.

Need help? Not sure? Call for FREE 30min advice / strategy session today! 0407 361 596 Aust

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Cashflow Tips – What Cashflow means to your Employees

Cashflow Tips – What Cashflow means to your Employees

Cashflow Tips – What Cashflow means to your Employees

The Great Game of Business (GGOB) is a book and website and coaching movement that originated as a means to save a company division of International Harvester on its demise back in the 1980’s and how employees and management saved the company and their livelihoods with a unique way to run business – it has grown to launch another 60 associated companies and is regarded as one of the for-runners of Open-Book Management. Here is an exert from one of its blog posts).

Dave Sholten writes … Here are three statements in which I fully believe:

1.     Cash flow trends can be the ultimate measure and indicator of success and/or failure of the company performance.

2.     Your employees are begging you to be transparent with them.

3.     It is important to your employees that they can TRUST you.

Put These Three Statements to Good Use

If we can assume (and agree) that the above three suggestions are accurate, then employees really want to know the honest financial health of the company, which most often includes cash flow.

Don’t ever let your pride convince you to hide the bad news, or get in the way of being honest. Honesty doesn’t have to be easy, and doesn’t always have to be good news, but it is necessary and fair in every trusting relationship.

It would serve you and your conscious well if you identified a few of the key “success/failure” financial indicators of your company’s performance, and then plan a way to start sharing with the employees the “score” involving those indicators.

You might start with your annual update, and then enhance that communication to a quarterly update. You should look forward to when your employees start to ask you questions like:

  • Why did that number go up?
  • How does this number impact that numbers results?
  • What can we do to make that trend better?

When this happens, YOU HAVE ARRIVED! Your team, however many, are asking the questions, are asking to be more included in your game of business and want to learn more about the numbers and how to positively impact the future. You will gain support and teamwork in the future course of your business. Your entire workforce will be engaged in supporting your quest to “win the game.”

For those employees who don’t embrace the information and learning, keep a close eye on them. Their heads are in the sand, and hopefully (not a recommended corporate strategy) they don’t treat your product/service/customers/clients and fellow employees that way.

In conclusion, here is what your company’s cash flow means to employees:

  • Honesty
  • Trust
  • Confidence
  • Continued employment
  • Commitment to the team and organization
  • Faith in the future
  • Winning

What is your experience with employee engagement and helping you run the business as a team together so ALL benefit?

Need help? Not sure? Call for FREE 30min advice / strategy session today!

Call and you also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!

Email info@accountkeepingplus.com.au or call 0407 361 596 Australia


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Cashflow Tips – Improve your Cashflow – By Invoicing Promptly!

Cashflow Tips – Improve your Cashflow – By Invoicing Promptly!

Cashflow Tips – Improve your Cashflow – By Invoicing Promptly!

Many times, small business owners are uncomfortable about asking to be paid, yet the top way to improve your cashflow is by invoicing PROMPTLY! When you run a business, (especially service businesses) if you don’t invoice promptly as well as collect payment promptly (which causes a cash crisis in the first place), then consider the following –

Consequences for your cashflow:

  1. Clients can quickly forget what they owe you;
  2. They are less likely to remember how much they loved your work and pay you promptly;
  3. They may conclude that you do not expect quick payment and will take their time in sending in their money.

Some ACTION solutions:

  1. Where possible, issue invoices at the time services are delivered;
  2. Send your invoice by email to speed the process;
  3. If you can’t issue immediately, be sure to issue your invoices weekly, or at least twice per month on designated days, such as on the 15th and the last day of each month;
  4. Do it like clockwork – it will help to even out your cashflow.

Take-away message

Create the habit – invoice quickly and often.

Part of our service is assistance with cashflow budgets, debtor collection and reviewing supplier costs and terms.

One of our clients said the business finance is now in the BEST shape it has ever been – for our 4-5 hrs work weekly involves managing the invoices, payment follow up unique method and now supplier payments! The owner now can catch up on quoting jobs and finalizing the sale to grow the business.

Could this assist you in your business and let you focus on your best skills and on running the business? If you would like to speak with these clients, email me and I’ll supply contact details!

Get a FREE 30 min answer to your query, and FREE ongoing email or phone support – No-one offers as much! Call and you also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!

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Cashflow Tips – Does profit mean cash? – Do you know the difference?

Cashflow Tips – Does profit mean cash? – Do you know the difference?

Cashflow Tips – Does profit mean cash? – Do you know the difference?

I hear many clients say there is a profit in their business, then say they don’t have cash in the bank – what they often don’t realise is Profit does not mean Cash!

If you have all cash sales, profit will usually correlate closely with the bank account, depending on when banking is completed – that is you get paid immediately and bank it, and do not invoice (waiting to be paid in 7,14, 30 days etc). And you pay your expenses with cash direct from the bank, the balance should be the cash Profit.

But if you invoice clients for goods and services, the timing of when customers pay has an effect on the cash the business actually has. For example not everyone pays on time, but if they did you would have more regular cash flow, and at the start the first money coming in would only be delayed by the terms at the beginning eg 7 days, 30 days. Once those days of waiting have passed, the regular payments will mean regular flow of money to cover your expenses.

What happens if clients are late paying? Then the debtors/accounts receivable asset account on your balance sheet will grow (that is where the invoice “waits” for payment) until the client pays.

As an example, in our earlier post explaining Profit and Loss, (see HERE) we gave an example of Profit and Loss resulting in $15,000 profit.

Cashflow Tips – Does profit mean cash? – Do you know the difference?

Consider now, that you were only paid half of the sales at the end of the period (which is more close to reality – eg most pay the next month or two…in 60 days)

Sales (invoices)                                       $100,000

But only paid (actual cash)                   $50,000

Which goes to bank (in assets)

Net Left                                                       $50,000

Which sits in debtors/receivables (in assets)

NotePROFIT would be same in accounting terms,

but CASH Profit would be -$35,000 – see below

Business Cash Profit

That is – if you still had paid all your bills, you would have to find $35,000 to pay them!

This is where businesses will use credit cards or overdrafts to keep paying suppliers and the rent to stay open!

Need help? Not sure? Call for FREE 30min advice / strategy session today!

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Cashflow Tips – Helpful tips for managing your money in your business

Cashflow Tips – Helpful tips for managing your money in your business

Cashflow Tips – Helpful tips for managing your money in your business

Here are some exerts from a great resource for managing the money in your business, at the Queensland Govt site at:

http://www.business.qld.gov.au/business and under the Running a Business then Making and Managing Money –

Managing Cashflow

Your cash flow is the money you have coming in from revenue and going out for expenses. Good cash flow management will ensure you always have money available for paying your expenses when they are due.

Even profitable businesses can fail if cash flow is not managed properly. If you don’t have enough money available to pay your lenders or suppliers, banks may foreclose and suppliers could cut supplies.

There are many areas in your business that can impact on your cash flow. It is important to understand how customer payment terms, supplier payment terms, loan payments, future spending decisions and other items can affect your cash flow.

This guide will help you to manage your cash flow and understand how to use cash flow analysis to inform business decisions.

Plan and Monitor Cashflow

Planning and monitoring your cash flow is one of the most important things you can do when running your business. This should also include how you will address cash shortfalls or surpluses if they occur.

Forecast cash inflows against cash outflows

A cash flow statement will help you forecast your money coming in and going out. Forecasting your cash flow is usually done annually and broken down into monthly amounts. Always record the amount in the month it is expected to be spent or received. For example, electricity is usually paid quarterly so should be recorded in the month it is due.

You can use a cash flow template to forecast your annual cash flow. You will need to estimate and record the following amounts for each month:

  • Total monthly cash inflow – includes sales, sales of assets, capital injections from borrowings or owners funds, interest revenue and any other sources
  • Total monthly cash outflow – includes items such as purchases, loan payments, supplies, telephone, electricity, wages and any other bills
  • Net cash flow – take the total outflows from the total inflows to see if there is more money in or out
  • Opening balance – record your cash available at the beginning of the month
  • Closing balance – calculate your funds available at the end of the month by adding the net cash flow to the opening balance. This will become your opening balance for the next month. Note: If your net cash flow is negative, this amount will be reduced.

Include GST when inserting amounts for some cash inflows (particularly sales) and many cash outflows (particularly purchases). Calculate the difference between total GST inflows and total GST outflows and insert this as GST payments.

Different businesses are subject to differing GST requirements, so you should seek specific advice from your tax adviser. Learn more about working with business advisers.

Monitor actual inflows against outflows

As each month passes it is important to record your actual cash flow. This can be compared against your forecast to see if you are tracking as planned. You may find you need to review and adjust your forecast as amounts change over the year. Always make sure your payments received match invoices issued, and receipts and payments match.

Invest surplus cash or arrange loans

If you forecast excess cash for some months, it can be worth putting it in short-term investments to maximise your income. If you anticipate any shortfalls in cash, you may want to plan to use this invested excess, or seek for an appropriate loan to temporarily cover your costs. Don’t forget to include these extra payments or receipts in your cash flow forecast.

Related links

Watch recorded webinars to learn about financial management: back to basics and financial management: the how to.

Need help? Not sure? Call for FREE 30min advice / strategy session today!

Call 0407 361 596 Aust and also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!