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The seventh cause of poor cashflow - Sales levels are too low

It might sound obvious, but it isn’t to many businesses. If current sales levels don’t support the overheads and other cash demands on the business, then your overdraft will keep increasing.This means that your business in its current state is not viable (unless you have ongoing access to new funds from investors or financiers).There are five ways to improve your sales levels. These are:1. Increase customer retention.Stop your customers from defecting to the competition.2. Generate more lead...

The sixth cause of poor cashflow - Overheads are too high

Overheads isn’t typically a place where you will find a lot of wastage. Our experience is that business owners are very careful about managing their expenses, and the smaller the business, the truer that statement is.Having said that, as a business grows, so do the layers of hierarchy. Management control can deteriorate, and the business can become a bit flabby. The trick is to trim the fat but not the muscle when evaluating your expenses.As an absolute minimum, every business should do a thor...

The fifth cause of poor cashflow - Gross profit margins are too low

Your gross profit margin is what is left from your total sales after variable costs are deducted.For example, if you are a retailer and your sales in a given period are $1,000,000 and the cost of the goods you sell in that period is $650,000, your gross profit margin is $350,000, or 35%.In the above example, if you implement some strategies to improve the margin from 35% to 39%, your gross profit will improve from $350,000 to $390,000. That’s an increase in profit of $40,000. You may need to i...

The fourth cause of poor cashflow - Your debt or capital structure

Often a reduction in interest charges as well as significant cashflow improvements can be achieved with a regular review of existing debt.A good place to start is to list all bank loans, mortgages, finance company loans, hire purchases, credit card debts, and any other debts (don’t include amounts owed to suppliers in this list). Add columns to cover:The amount of the debt owedThe interest rate being chargedWhether the interest is charged on a fixed or floating rate basisRepayment terms (the n...

The third cause of poor cashflow - Your stock turn

Carrying stock for too long means full shelves but an empty bank account. Similarly, if you’re a service provider and are taking a long time to bill for your services, then you’re carrying too much stock in the form of work in progress. Consider that work in progress a form of virtual stock.You can calculate your ‘stock turn’ by taking your cost of sales from your annual financial statements and dividing it by your average inventory (or work in process). Most clients need some help from ...

The second cause of poor cashflow - Your accounts payable process

The second cause of poor cashflow relates to when and how money is spent in your business, and includes your Terms of Trade with suppliers.Do you have spending budgets in place?It’s best practice to prepare an overall business budget every year, usually before the beginning of the new financial year. It’s also best practice to make sure that team members with the authority to order products and services are doing so within the parameters of an agreed budget, and that controls are in place to...

The first cause of poor cashflow - Your cash lockup

There’s a massive difference between profit and cashflow. Profit increases when you create an invoice for work you’ve done or goods you’ve sold; cash increases when you bank the money.Your lockup equals the cash that isn’t in your bank account because it’s either in work in progress (you’ve done some work but you haven’t yet billed for it) or you have billed your customer but are waiting to be paid.There are two key processes that need to be improved to reduce the cash that's stuck...

Cashflow freedom - The 7 causes of poor cashflow

Cash is the lifeblood of any business. Even profitable businesses can and do fail because of poor cashflow.What’s important is that you understand your key cashflow drivers. Improving cashflow is often all about changing your processes. Processes such as how you order stock and pay for it, how you bill for your services, and how you make sure you get paid by your customers.Treating the symptoms of poor cashflow without fixing the underlying causes is time-consuming and frustrating.In...

Want to spend more time doing what you love?

A key benefit of owning your own business is choosing your working hours.That was probably a drawcard when you started out. Chances are, you planned to spend less time in your business and more time with your friends and family. Then reality kicked in and you found yourself coming in earlier, staying later, and taking work home with you on the weekend. This probably wasn’t the life you'd imagined.So, how do you start reducing your hours to get the life you want?1. Identify the biggest time was...

Introducing our Value Gap Analysis Report

Can you see the potential that lies in your financial data?Your financial statements give us insights as to the opportunities that exist for you and your business. This external perspective can help you run a more effective business - whether you’re seeking growth or efficiency.Introducing: The Value Gap Analysis Report.Our new report documents the gap between where your key numbers are currently and where they could be with clear direction to make material improvements.Your bespoke report pro...

Everything You Need to Know About Retail Stock Control

Inventory management or stock control, encompasses all the tasks you carry out to keep your inventory in check. Activities like ordering products, storing your merchandise, counting items, and forecasting demand are all components of inventory management.Having the right products at the right time for your audience is critical in retail. In order to run a successful retail business you’ll need to think about the following key areas:Sourcing products effectively - by tapping into online di...

FoMO or JoMO? Give your business decisions (and yourself) a chance to breathe

In reviews of buyer trends and marketing reports, the term FoMO often pops up. It stands for the fear of missing out. It’s the feeling that, whatever you’re doing, you’re missing out on something happening somewhere else, a product or experience you just must have.In your marketing campaigns, it’s your friend. Let customers and prospects know they’re in danger of missing out if they ignore this wonderful opportunity, service, product, discount, or promotion.But don’t let it drive you...

How to conduct workplace trials

Workplace trials are a great tool for evaluating potential employees, but it's important to approach them carefully to ensure they are fair and lawful.Here are some important factors to consider during the trial process:The business can’t benefit financially - don’t get a person to do work one of your paid employees would typically do, e.g. serve paying customers.Don’t pay the person - trials are voluntary and only for assessment purposes.Keep it short - the longer a trial g...

What’s the difference between employees and contractors? And why does it matter.

Does your business use both employees and contractors? It’s important to distinguish between them as they are paid and taxed differently.Despite what you may call the individual concerned, that description is not definitive. If the status of the worker is questioned in the Employment Court or Employment Relations Authority, for example, the Employment Relations Act 2000 requires a consideration of the ‘real nature of the relationship’.Common law tests assist in determining what that is. Th...

5 tips for running good performance reviews

When times get tough, it can be easy to let some of your people processes fall away as you concentrate on the basics of the business.Take the performance review. They can be unpopular, sucking up a lot of time and making employees and managers stressed. So why not skip them?Because good performance reviews work. They’re an effective way to track people's progress, provide feedback, gain insight, support development, and align individual performance with company goals, which helps the business ...

Top tips for building a strong company culture

Like it or not, all companies have a culture.While it might be easy to define culture in nice words, it can be much harder to grab hold of in daily business, especially when times get tough.A strong company culture is a driving force, underpinning a successful, resilient team. It shouldn't be ignored, especially during testing times.But what are the best ways to develop and manage a good company culture? Here are some top tips:Get the basics right - sorting out the basics is critical to est...

How to grow your Trade Business

Ready to scale your trade business? Imagine it as climbing a challenging peak – your venture starts at the base, and ascending to the summit demands smart strategies. This summary is your roadmap, leading you step by step towards success.Let’s talk about staff. Hiring matters – from apprentices to subcontractors and full-timers, each has perks. Financials are crucial. Understand your cash flow and set optimal rates for sustainable growth.Streamline admin. We explore easy quoting, invoicing...

Flat Rate vs Hourly for Trade Professionals?

Attention all trade professionals! Do you have your skills & services down pat, but pricing is giving you a headache?Hourly rates might secure every minute worked, but flat rates offer predictability—just watch for undercharging pitfalls. The hybrid method, a dynamic fusion, caters to diverse jobs. However, each has nuances, like client concerns or the pressure of fixed rates.Tailored for your trade, discover which pricing strategy suits your business best. If job hours are your strong sui...

10 hot questions to ask yourself as a business owner

Running a busy and successful business means you often don’t have the time to step back and work ON the business. This can be a challenge if your aim is to grow and scale the company.As experienced professional business advisers, we know the value of taking the time to ask yourself some pertinent questions. Holding yourself and the business to account is something we can help with. And there's never a bad time to pose a few questions and gauge where you're at with your planning, strategy, fina...

Can business automation streamlines your business?

How can business automation streamline your business? Business automation uses technology to streamline and simplify all the repetitive manual tasks, processes and workflows that are part of the everyday running of your business.Instead of spending hours of business time doing everything manually, automated systems can take on most of the heavy lifting. You can automate the data-entry of your bookkeeping, the sending of recurring invoices or the coding of transactions when doing your bank reconc...

Fringe benefit tax - The cost of employee perks

Rewarding your team with vouchers or trips? Providing a car or a gym membership? FBT can be tricky, so make sure you’re calculating the true cost of employee perks.What is fringe benefit tax?Fringe benefit tax, or FBT, is a way of taxing employee benefits. It’s designed to make sure people are paying tax on all types of income, including perks.The single-rate FBT is 63.93%. The short form alternate rate is 49.25%. There are four options for calculating FBT, and you can read about FBT rates i...

Which employee gifts are tax exempt?

Whether it’s for reaching a sales target, a birthday, Christmas or just to say thanks, sometimes you want to buy gifts for your employees.Although it’s a nice gesture, as a business owner it can be unexpectedly complex to provide staff perks. Perks like subsidised gym memberships and discounted products will attract fringe benefit tax, while cash and cash-redeemable vouchers are taxed as part of PAYE.Any cash, or vouchers redeemable for cash, are taxableA gift that comes in the form of cash,...

Take care of yourself, not just your business

Being a business owner can be stressful. When the buck stops with you, it can be easy to let the pressure mount up and to discount your own wellbeing.But taking care of your own mental health is equally as important as taking care of the business – research from MYOB showed that 53% of business owners suffer from stress and anxiety relating to the running of their business So, what can you do to take care of your own mental health and work mindfullness into your usual life routines?W...

Keeping your business cash liquid – the difference between cashflow and profit

The foundational goal of any business is to make a profit. As a business owner, that’s one of your key financial aims – to make enough sales, at a big enough margin, to generate profit from your enterprise. But how does profit differ from cashflow? And why is cash king?How do profit and cashflow differ?To really understand the difference between generating profit and managing cashflow, we need to look at what both these terms mean. You might think that delving into the accounts is a job for ...

5 challenges for small business - and how to beat them!

Founding, building and growing your own small business is a hugely rewarding experience for many entrepreneurs. But the road ahead isn't always smooth.There are common challenges that crop up and ongoing issues that need to be factored into your business plan, your strategy and your own personal thinking.So, what can you do to beat these challenges and make the journey as frictionless as possible?5 proactive ways to overcome your business challengesWe’d all love to know what lies around the co...