Tips To Cashflow Success

Cashflow funding of a business is key for its survival. A number of businesses fail within their first two years of trading, not because they didn’t have a good product or service, not because they didn’t have a market. They simply ran out of cash.

Sales Income

Prepare a detailed cashflow of your normal business trading, information from Sales already in your diary, if you have been trading for a few years. Use past history to project forward. For the new business set an achievable goal. Always look ahead a minimum of a year, three years if possible.

You may have peaks and troughs, downtime or seasonality, build these into your forecast.

Don’t forget VAT if that applies. Ideally shown it separately, and offset the VAT on purchases. Your sudden inflow of cash may belong to the Inland Revenue.

Your Costs

Main costs first

Materials
Wages
Rent
Travel etc.

At the bottom, how much do you have in the bank to start off with. Show the opening balance of the bank.

We always look at forecast cashflows, ie a budgeted one along with an actual one. As the months pass by update the cashflow with your actual figures and roll forward. So that you are always looking at a year to date. It does not necessarily need to be in line with your year end. Do a separate one for the year end if necessary.

By now you will know ahead of time your cashflow issues, peaks and troughs, you can now put a plan of action to make sure that you are covered in the troughs, and are saving in the peaks.

If you need a large amount of cash in six months time. Don’t leave the sudden influx of cash to the last minute. Build up over a period of time.

You might be wanting to buy capital expenditure, or take on more staff, it will help you predict when this can take place.

Look at your marketing to increase sales. Check your margins to make sure your sales cover your costs. Keep a close eye on the costs themselves.

Look at other options for finance other than your cashflows from the business.

Gain credit from your suppliers
Finance leases from the banks and other money lenders
A mortgage

Your credit score can even affect you being able to take on a large contract. You will still need the credit from your supplier to make that important sale.

By gaining credit it will increase your credit score and make you more attractive to lenders.

Nicola Cross
26/9/11

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.

As summer has ended and the colder nights approach, it can be a bit tough to take with the local lockdowns in place. We need to try and stay spirited and make the most of our situation. If you are having to close or reduce hours, make sure to keep promoting your business on social media, so once you are back, you are still in front of people’s mind. There is some support still out there, carry on reading to see what you can apply for before the deadlines approach.

Coronavirus Loans

The Chancellor, Rishi Sunak has announced that businesses that have borrowed money through the government's loan scheme, such as the “bounce back” loan and the “Coronavirus Business Interruption Loan Scheme” would be given more time to repay the money.

A new Pay as You Grow flexible repayment system has been introduced by the chancellor for small businesses who took out the "Bounce Back". It means borrowings can be repaid over ten years instead of the original six-year term.

The longer repayment time also applied to small and medium-sized firms who borrowed under the “Coronavirus Business Interruption Loan Scheme”.

Businesses will also have more time to apply for these loans, application dates for the schemes had been due to end in October.

Job Support Scheme

As furlough comes towards the end, the chancellor announced a new replacement scheme for the Job Retention Scheme (furlough). From 01 November, the new scheme known as Job Support Scheme will see that the government will contribute towards the wages of employees who are working fewer than normal hours.

Any hours worked by the employees the employer will continue to pay their usual wages of the hours worked. For hours not worked, the government and the employer will each pay one third of the equivalent salary. The government’s contribution will be capped at £697.92 a month.

Kickstart Scheme

With Coronavirus effecting everyone, some of the hardest hit were the young people. The Kickstart Scheme provides funding to employers to create new 6-month job placements for young people aged between 16 – 24 who are currently claiming Universal Credit and at risk of long-term unemployment.

This is the government’s plan for jobs and to create hundreds and thousands of new, fully funded jobs across England, Scotland and Wales. More details are yet to come out and the first placements are likely to be available from November.

The Kickstart Scheme will cover 100% of the National Minimum Wage for 25 hours a week as well as the employer National Insurance contributions and employer minimum automatic enrolment contributions.

There will also be extra funding to support young people after the 6-month period to help build their experience and help them move into sustained employment after they have completed their Kickstart Scheme.

Self-Employment Income Support Scheme

The previous support for the self-employed has been decided by the government to be extended. The extension will provide two grants and will last for six months, from November 2020 to April 2021. Grants will be paid in two lump sum instalments each covering a 3-month period.

You must currently be eligible for the original Self-Employed Income Support Scheme, though you do not need to have claimed it. It must be declared that you are actively trading and that you are impacted by the pandemic. HMRC will provide more details about claiming in due course.

VAT Reduced Rate

There was a series of new measures introduced to help hospitality, holiday accommodation and attractions sector. These included VAT being cut to 5%, effective from 15 July 2020. The VAT cut will remain in place and has been extended to run until 31 March 2021.

For restaurants and cafés that provide food services for both take away and dine in, the temporary reduction in the VAT rate only applies to;

·         Food for consumption on the premises on which they are supplied

·         Non-alcoholic beverages for consumption on the premises on which they are supplied

·         Hot takeaway food for consumption off the premises on which they are supplied

·         Hot takeaway non-alcoholic beverages for consumption off the premises on which they are supplied

We all need to continue supporting each other, shop local wherever possible, helping the small independent shops. Let’s follow government guidelines and rules, to stop a spike in cases and who knows, our sacrifices may be worth it when we may be able to celebrate come Christmas.