Cash is King!
31st March 2017
Last month we wrote about watching both the top (turnover or sales) and bottom (profit) lines in your business; working out what you need /want from the business and planning from there rather than taking the ‘leftovers’; saving monthly for your tax; having a system in place to be able to easily see your financial performance; and making sure you review the numbers regularly. Read last month’s newsletter here.
Below is some more food for thought
A cheque in the cheque book doesn’t mean cash in the bank
I recently banked a cheque and was surprised to see the amount go in and then quite soon after come out of my account again! Not used to receiving cheques very often it took me a while to bank it. The issuer had forgotten about it and had not expected the amount to go out of their account a couple of months after giving me the cheque.
It’s their money, not yours
On a similar vein to the above, in a recent client conversation about their visibility of how their business was doing, I was told that they keep an eye on the progress regularly by looking at the bank balance and that gives them a good indication of how they are doing. What part of that bank balance belongs to your creditors, the tax man or your team? How do you monitor how your business is doing?
Beware of being on auto-pilot
Whilst automatic renewals can be useful in terms of saving you the hassle of remembering to renew certain services, make sure you have the funds available when the renewal goes through and perhaps also a note to review that you’re getting the best deal and the best service.
It’s your money not theirs
Many of our clients in the manual therapy business operate fairly cash rich businesses. There are however many who rely on a flow of patients from private medical insurance companies and other intermediaries. Unfortunately most of those suppliers don’t just pay and need to be chased for payment. One of my clients had huge amounts in the 60 days plus category of their accounts receivable but once attention was given to it, a clear process implemented and someone allocated to be responsible for the collection of outstanding debt, their bank balance went up and amount outstanding down. Now they keep on top of it and avoid those 3am cashflow nightmares.
Don’t be a cheap-skate
In Afrikaans, one of the official languages of South Africa, they have a great saying which translates to ‘cheap buy is expensive buy’ (‘Goed koop is duur koop’) Beware of focussing on saving money on products or services which end up costing you more, either by needing to be replaced sooner than a superior product or by causing you to spend more time than you might do with an alternative product or service. How do you decide on your purchases?
Cash is King extends for one’s lifetime. How much cash will you need when you choose to slow down or retire? What does that mean you need to be doing now to make that happen?
We speak to many business owners and more often than not there is no clear (or even fuzzy!) plan in place for the future.
Watch this space for our brand new course that we will be launching in June in collaboration with Simon Claxton, an independent financial adviser and co-owner of Macbeth Financial Services, to help you to consider your lifestyle aspirations, the financial implication of those, pre and post retirement planning and the legalities of pensions/ISA etc
We hope you find the tips above useful and if we can support you through your journey, please do get in touch!