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Get a grip on your cash flow

24/10/2011 By Mushroom Internet

Predict and plan: work out in detail when you can expect cash to come in and plan how you will spend it. It will help you to see where you can generate extra cash to fund new projects if you are growing, or even pay off old creditors if you are stressed.

While this applies whatever the size of business, it is particularly critical if you are a micro businesses or a small businesses with significant order-to-ship lead times, buying materials and selling products on credit terms, when you will have a significant working capital – cash – requirement to fund the work in process.

On this article we’ll show you how to put together a cash flow management workbook that will help you to manage your cash, month by month.

Start with your order book and prospect list

Starting with cash coming in, you’ll know your order book, but what about beyond that?

This is the hard bit – study your prospect list and write down when you can expect to get new orders from those clients. For this you have to really understand your clients’ intentions and buying behaviour.

Then,  for your current order book and your prospect list you document your cash inflow:

  • order dates;
  • shipment dates; and
  • client payment dates and amounts.

Suppliers and inventory

Do the same with the supplies, or the stock replenishment you will need to complete those orders – one of the major parts of your cash outflow:

  • supplier order dates;
  • goods in dates; and
  • supplier payment dates and amounts

VAT

At this stage you can then predict the two main elements of your VAT liability. This is particularly important if your are on the accrual system when your VAT is pinned to invoice dates rather than cash payments and receipts.

From your order book and your purchasing plan you have the tools to start to calculate the VAT reserve you will need at the end of each VAT quarter.

Staff costs

You should be able to predict these and add them to your spreadsheet, including PAYE and employer’s NI liability.

Overheads

These, you can obtain from your management accounts. If you don’t have monthly management accounts – and you should – you can use your bank and credit card statements, and your cash book.

The simplest way is to include monthly averages, making allowances for any known increases and decreases. You can then account for any VAT recoverable on overhead supplies.

Cash flow management workbook

So there we have it – your cash flow management workbook. From it you’ll be able to see:

  • what funds your have to pay off overdue creditors if your business is stressed;
  • what funds your have to fuel your growth;
  • which areas to tackle to improve your cash flow – for example see our article on creditors; and
  • what extra funds you will need to bring in to accelerate your growth.

Essential tools for well managed businesses!

Posted by Peter Johnson, Business Advisor with SGBA. If you would to talk to someone about your business, please call Peter on 07714 093406 or send him an email to peter.johnson@sgba.co.uk.

Filed Under: Finance Tagged With: business advisors, cash flow, customers, Overheads, profitability, sales management, SMALL BUSINESS, SME, staff costs, suppliers, Sustainability, Tax

>Calling All Small Businesses – are you keeping the right records??

09/03/2011 By

>Do you know which records the law says you need to keep?

Whether you work for yourself or you run a small business employing others, good record-keeping has a number of benefits. For starters, if your records are up-to-date, it makes filling in your tax return easier and could help you avoid paying too much tax. Keeping track of your income and expenses will also help you budget for any tax you owe. And it can also help reduce your accountant’s fees, if you use one, as well-organised information saves them time too.

Up-to-date records also give you the information you need to manage your business and help it grow. They will make it easier to get a loan, if you need one, and may support your claim to some tax reliefs or capital allowances.

Invoices, receipts and deductions

You should keep invoices and receipts to show what you have bought or sold relating to your business. If you are employing others, you must keep records of their wages and the tax and National Insurance you have deducted and paid to HM Revenue & Customs (HMRC). You need to show clearly what you have spent personally and what you have spent on your business.
If you use cash, you should retain till receipts and a record book to keep track of it all. If you are using part of your home for business then you should keep copies of utility bills, so that you can work out the amount spent in relation to your business.

Update information regularly

You should update the information regularly – if you don’t you may face a penalty for failing to keep adequate records.

What records do I need to keep?

Whether you are just starting out in business or you are already up and running, Business Link’s online record checker will tell you which records you need to keep and give you feedback on any improvements you need to make. Go to www.businesslink.gov.uk/recordkeepingcheck.

There is a basic factsheet on record-keeping that covers self employment, contracting in the construction industry scheme, partnerships, VAT, employers and limited companies. See www.hmrc.gov.uk/factsheet/record-keeping.pdf

Detailed guidance on record-keeping – covering what type of records you may have to keep, common problems and examples for different types of business – can be found at www.hmrc.gov.uk/sa/rk-bk1.pdf

.

Filed Under: Business Planning Tagged With: book keeping, HMRC, records, Tax

>Calling All Small Businesses – are you keeping the right records??

09/03/2011 By Mushroom Internet

>Do you know which records the law says you need to keep?

Whether you work for yourself or you run a small business employing others, good record-keeping has a number of benefits. For starters, if your records are up-to-date, it makes filling in your tax return easier and could help you avoid paying too much tax. Keeping track of your income and expenses will also help you budget for any tax you owe. And it can also help reduce your accountant’s fees, if you use one, as well-organised information saves them time too.

Up-to-date records also give you the information you need to manage your business and help it grow. They will make it easier to get a loan, if you need one, and may support your claim to some tax reliefs or capital allowances.

Invoices, receipts and deductions

You should keep invoices and receipts to show what you have bought or sold relating to your business. If you are employing others, you must keep records of their wages and the tax and National Insurance you have deducted and paid to HM Revenue & Customs (HMRC). You need to show clearly what you have spent personally and what you have spent on your business.
If you use cash, you should retain till receipts and a record book to keep track of it all. If you are using part of your home for business then you should keep copies of utility bills, so that you can work out the amount spent in relation to your business.

Update information regularly

You should update the information regularly – if you don’t you may face a penalty for failing to keep adequate records.

What records do I need to keep?

Whether you are just starting out in business or you are already up and running, Business Link’s online record checker will tell you which records you need to keep and give you feedback on any improvements you need to make. Go to www.businesslink.gov.uk/recordkeepingcheck.

There is a basic factsheet on record-keeping that covers self employment, contracting in the construction industry scheme, partnerships, VAT, employers and limited companies. See www.hmrc.gov.uk/factsheet/record-keeping.pdf

Detailed guidance on record-keeping – covering what type of records you may have to keep, common problems and examples for different types of business – can be found at www.hmrc.gov.uk/sa/rk-bk1.pdf

.

Filed Under: Business Planning Tagged With: book keeping, HMRC, records, Tax

>HMRC targeting SMEs with poor records

11/02/2011 By Mushroom Internet

>

UK Business Advisors (UKBA) understands that HMRC have carried out a random enquiry programme from which they believe that 40% of SMEs have either inadequate or poor record keeping. They issued a consultancy document in December entitled “Business records checks” with a view to implementing a programme from the middle of this year to examine the books and records of some 200,000 small businesses. They anticipate raising an additional £600m in tax over four years – an average of £3,000 per company.

UKBA’s own research has found many commons problems such as:

· Poor evidence of expenditure such as missing key purchase invoices

· No documented dividend resolutions

· No minutes of key board decisions

· No records in support of journal entries like bad debts or disposal of major assets

· No directors service contracts in multiple-director companies

· Outsourced services not contractually written down or documented.

Any of these give HMRC an easy route into a company’s records and open up investigations.

Richard Terhorst, Specialist in the Financial Support arm of the UK Business Advisors said “HMRC have found a new hunting ground – taxpayers whose records are poor. We strongly recommend that businesses with concerns about their records get in touch with us. We’ll give you a health check. It could save you a lot of grief and cost in the future.”

Filed Under: Business Planning Tagged With: dividends, records, SGBA, SMALL BUSINESS, SMEs, Tax

>HMRC targeting SMEs with poor records

11/02/2011 By Mushroom Internet

>

UK Business Advisors (UKBA) understands that HMRC have carried out a random enquiry programme from which they believe that 40% of SMEs have either inadequate or poor record keeping. They issued a consultancy document in December entitled “Business records checks” with a view to implementing a programme from the middle of this year to examine the books and records of some 200,000 small businesses. They anticipate raising an additional £600m in tax over four years – an average of £3,000 per company.

UKBA’s own research has found many commons problems such as:

· Poor evidence of expenditure such as missing key purchase invoices

· No documented dividend resolutions

· No minutes of key board decisions

· No records in support of journal entries like bad debts or disposal of major assets

· No directors service contracts in multiple-director companies

· Outsourced services not contractually written down or documented.

Any of these give HMRC an easy route into a company’s records and open up investigations.

Richard Terhorst, Specialist in the Financial Support arm of the UK Business Advisors said “HMRC have found a new hunting ground – taxpayers whose records are poor. We strongly recommend that businesses with concerns about their records get in touch with us. We’ll give you a health check. It could save you a lot of grief and cost in the future.”

Filed Under: Business Planning Tagged With: dividends, records, SGBA, SMALL BUSINESS, SMEs, Tax

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