Essential Business Advice Tips: Finance

The Late Payment Cycle

Despite the Late Payment legislation UK businesses are taking the longest time on record to pay their bills.

Businesses are currently taking over two months to settle their debts according to the credit checking company Experian. This is an increase of two days in the last year.

As usual the larger companies are taking longest with an average of 82 days and smaller companies now averaging over 61 days. However it is usually the smaller companies who are most likely have cashflow problems.

The industries who have increase their payment days most are:

Electricity,

Property,

Pharmaceuticals,

Beers, Wine and Spirits,

Oil and Gas have all increased by over five days.

The longer a company takes to pay the their invoices could be an early warning indicator to cashflow problems. If you are running a business then you need to monitor the speed at which your customers pay their bills, because while the invoice is unpaid the money is at risk.

Remember a sale is not a sale until the invoice is PAID.

If the invoice is not paid then the money is at risk and could be lost.

Therefore businesses should press harder to be paid on time with in the terms of the agreement. Companies are all under pressure to hold onto cash for as long as possible.

This can lead to a battle of wills between the credit controller of the supplier and the purchaser ledger manager of the customer.

The figures indicate that the late payment culture is getting worse.

This can lead to a battle of wills between the credit controller of the supplier and the purchaser ledger manager of the customer.

Businesses should not be acting as an unpaid bank for their customers.

via UK Business Advisors Ltd | UKBA – Articles: Finance – The Late Payment Cycle.

10 Ways To Speed Up Customer Payments

Q:    WHAT ARE THE THREE MOST IMPORTANT THINGS IN BUSINESS?

A:    CASHFLOW, CASHFLOW, CASHFLOW

Cash flow is the life blood of any business and more businesses go bankrupt because they fail to keep the cash flowing than fail for any other reason.

The Inland Revenue and HM Customs are much more aggressive in chasing monies they think are owed to them now that they have lost their privileged creditor status.

Insolvency

A company or business is insolvent if they cannot pay their creditors as the invoices fall due.`

In order to avoid this happening you need to ensure that you get paid on time by your customers so that you in turn can pay your suppliers when their invoices fall due.

The Ten steps you can take are:

1    Make sure your customers know your terms of trade. i.e. payment is due in 7 days. Many companies take 30 days to pay but make sure they know what your terms are and the reasons for them.

2    Make sure you raise your invoices for work done promptly.

3    Send out statements at the end of each month to all customers who have     outstanding invoices. Many Finance Directors will only pay when they have received a statement, so send it early.

4    Telephone the customers purchase ledger manager and ask if your invoice is on the next payment run. If it is good, if it is not ask why! And also find out what you have to do to get it onto the payment run.

5    Get to know the purchase ledger managers and talk to them regularly.

6    Find out when each customer does their payment runs and diarise them so you know when to chase your payments.

7    Where possible hand over the invoice when work is completed and let the customer know that you expect prompt payment as the work has been completed.

8    Where possible get either staged payments for a project or a payment up front for  materials etc.

9    If the relationship is ongoing ask for a standing order to be raised in your favour so that you get a regular monthly payment without chasing the customer.

10    Remember to have the Standing Order changed when you re-negotiate your charges each year.

via UK Business Advisors Ltd | UKBA – Articles: Finance – 10 Ways To Speed Up Customer Payments.

Strategies For Business Success – Buy Or Lease

You are starting or expanding your business – great! But you are looking at many more demands on your finances: office equipment, tools, furniture, computers and peripherals, vehicles, etc. Deciding whether to buy or lease what you need might seem overwhelming.

Leasing is tempting to many, as it requires less cash up front. Having enough cash is essential for survival when beginning or expanding your business, as you will also need to invest in many intangibles such as marketing, licensing, or hiring help. But, leasing usually costs more in the long run, often quite a bit more, and you are normally committed to a contracted time period. There are advantages and disadvantages to both.

Some Advantages of Leasing:

1. Lower Costs at Start-Up – Few businesses have “more than enough” cash on hand, especially when just beginning or expanding. Lower start-up costs can give you more time to get settled into the marketplace and get the word out about your products and services, giving you a much better chance of surviving those risky first years. You can get a lot more for a lot less immediate expenditure by leasing. Buying 20 computers will cost you thousands of pounds; leasing 20 computers may only run you a few hundred pounds per month.

2. Support and Maintenance – Leased equipment usually includes ongoing support, maintenance, upgrading, and possibly even training for you and your staff. You can even “lease” your business management software and services by way of online subscription.

This can enable even the smallest business to have the latest software versions automatically provided, and support staff on-call in the event of trouble.    (You might be amazed to learn how much time is lost and headaches created in many small businesses by confusing and challenging management and record keeping software and systems.) With hardware, it is far easier, for example, to call the lessor and have a broken copier replaced immediately than to wait for the repair serviceman for your purchased copier, wait out the downtime, and then face the bill for his services.

3. Flexibility – When you buy something, even if your needs change or better technology becomes available, your investment is tied up in the purchased item. Leasing may allow you to update or replace your equipment or furniture when you need to,    or even get rid of the commitment if you no longer need the item.

4. Tax Advantage – Most lease payments can be fully deducted in the year you paid them, whereas major equipment purchases may have to be depreciated over several years. Since your money will likely be tighter in the beginning months and years of your business, the ability to offset lease expenses against your initial investments may help you greatly at tax time.

Some Advantages of Buying Equipment and Supplies Outright:

1. Lower Lifetime Costs – Many things will cost you far less in total if you purchase them outright rather than leasing. You might pay £300 for an ergonomic desk chair that will serve you well for many years. The same chair, if leased, might run you £30 per month. You would then be paying £360 per year for the leased chair.

2. Lower Monthly Overhead – When you lease, you must pay the lessor on time, regardless of the level of cash on hand. If the income of your business varies widely from month to month, you can choose to only purchase equipment when you have the cash on hand and you will have fewer problems meeting your monthly budget.

3. Assets Rather than Liabilities – What you buy outright becomes an asset of your business, and so enhances your “bottom line.” Lease payments, on the other hand, qualify as liabilities, and so lower your company’s value. This may be important if you need to get a business loan or decide to sell your business. If you move or go out of business, your assets may be sold or taken with you, but it may be much harder to dispose of your lease contracts.

4. Tax Advantage – Since HMRC allows you to deduct a large amount of your business purchases from your gross income, if you are having a good year you may save significantly more by purchasing outright rather than leasing.

So, obviously there are pros and cons of buying as well as leasing. Here are some tips to help you make the best decision:

•    Leases are best for more expensive items, and cash purchases for less expensive items. Lower cost items can usually be afforded from income on hand, but it may not be advisable to deplete your funds to make larger purchases. If you lease the larger items, you can budget to save and purchase your own later, and still have management and promotion funds available now.

•    Find out the financial and tax implications of leasing versus buying for your individual situation.

Last but certainly not least, don’t be tempted to buy what you don’t really need. If your company is to grow and thrive, cash in the bank is worth much more than beautiful furniture or the latest techno-marvel.

via UK Business Advisors Ltd | UKBA – Articles: Finance – Strategies For Business Success – Buy Or Lease.

Getting Your Company Ready For Sale

Getting a company ready for sale is a bit like getting your car ready for sale.  Polish it up, get rid of the rattles, make sure you can find the log book and the service record.

How do you get your company ready for sale?  We consider that the following points are key:

1. Vision – Do you have a compelling vision which an interested party can buy into? Is your business clearly moving towards the realisation of this vision?

2. How does the company generate its revenue? – Is this through a well honed process based on lead generation, qualification and closure which is clearly producing a regular flow of high quality new customers – or is it, like most companies, based on your own personality and the fact you’ve been in the market for 20 years.  If the owners are the company’s greatest asset how are you ever going to exit?

Do all your customers sign a contract, or will they simply walk away once they know you’ve left the business.  Resolve to get all new customers to sign a contract.

Do you have an unhealthy dependence on one or two large customers?  Resolve to deliberately seek out a number of mid tier companies rather than a few larger ones.

3. How does the company operate? – Have you patented everything that you can?  Do you have registered trademarks or any other intellectual property (licence agreements and the like). Are they secure? It’s not always easy to do this, but it does “lock in” the value.

Does it sometimes look like a series of random chances that your product or service ever gets out the door intact?  If the owners weren’t there to supervise the business, would the staff know what to do? How well would the business run if the owners are away for a week/ a month? The better it could operate, the more valuable your business would be.

What about your suppliers?  Do you have access to favourable sources of supply, or excellent discounts?  Are these formally agreed and tied down?  Could a new owner benefit from them?

4. What are the resources like? – Do your staff have an employment contract, backed up by a staff handbook? Are there decent processes for recruiting staff into the company, motivating and developing them, and even removing them without involving an industrial tribunal.  Can they cope with change and think for themselves – or do they really depend on your dictatorship?

What about the buildings and equipment?  You wouldn’ try to sell your car without at least putting it through the car wash – so does the office and or warehouse look a mess and what could you do about it?

Are the IT systems coherent without dependency on the intuitive skills of Fred in the corner?  Strong IT can help you and the new owner make better decisions faster.

5. What are the finances like? – Do you have sustained growing earnings, or do they make a roller coaster look like a walk in the park? Can you demonstrate financial control?  Are the accounts useful or simply something to keep your accountant out of the way?  Can you explain the trends?

Even if you don’t sell the business you know that what gets measured, gets done.  Resolve to take more notice of the accounts and use them as a signpost of progress.

6. Make a plan of what you’re going to do – Set aside some time and take a cold look at the business

Where are we now?

Where do we want to get to?

How are we going to get there?

It’s not rocket science,

it’s not even very clever,

but it is very difficult.

In fact, in our view, you need help to do it.  You’ve known you’ve had to do it and simply not got around to it.  Working in the business, rather than on the business, you’d have done these things by now if you were ever going to without help.

via UK Business Advisors Ltd | UKBA – Articles: Finance – Getting Your Company Ready For Sale.

Improve Profits With Innovative Business Ideas

Innovative business ideas are key to sustain and improve your business profits.

This ability is needed to stay ahead of competition even as competition responds to the ideas that you implement. How do you keep generating these ideas?

1. Involve in Activities to Trigger Your Mind

Take a walk, go for a swim or read something that will get your creative juices flowing. Just sitting at your desk may not work. Albert Einstein used to day dream in the park. Thomas Edison used to go fishing.

It seems like the mind works best when it is allowed to relax doing something else. Then somehow, it is able to come up with ideas relatively easily as compared to if you sat at your table and tried to force them out.

2. Apply Constraints Last

When generating innovative business ideas, it is important to allow the ideas flow spontaneously. Focus on volume first. Do not worry about the cost, skill or the effort required.

If you applied constraints as you are generating ideas, you will have a tendency of not listing out all possibilities that you can think of.

Only after generating a whole list of ideas, then think through them and prioritise them. Then start looking at the cost, skills required and the effort. How can these be managed in way that the initiative will be profitable.

If the first one does not look like it will be profitable, then move down your list and pick one that will. Any more good ideas left can be filed for future use.

3. Involve Your Staff

Sometimes, the people who carry out the operations are aware of some things that you may not be aware of. Involve these people to generate innovative business ideas.

Brainstorming with the staff will provide you additional ideas that you could use.

The important point about this approach is that your staff will be much more inclined to carry out ideas which they were involved in developing.

4. Do Not Be Afraid to Fail

Having new ideas brings along with it the necessity to implement them. Some people freeze even before they think of any ideas because some previous ideas have failed.

If you fear failure, then it is tough to scale greater heights in your business venture.

Accept that you will fail at times, but there will also be times when you will succeed.

Thomas Edison apparently failed 10,000 times before he got the light bulb working. J. K. Rowling submitted Harry Potter to more than 5 publishers before one decided that it was worth publishing.

You can be assured that the best have had failures. They are but a way to know what doesn’t work.

5. Keep Learning

Learning cannot be restricted to just what we learned at school. It must continue beyond that.

It will, of course, include learning in the area of your business. It should, however, include also learning in other areas. Sometimes, ideas come from an experience in life.

The Internet provides information in a wide variety of areas and is also one place where you can get a lot of information.

Generating innovative business ideas is a must for businesses to stay competitive. Not a question of choice. Try it out if you have not. You will enjoy it more than you think, and be very motivated when some of the ideas start succeeding.

via UK Business Advisors Ltd | UKBA – Articles: Finance – Improve Profits With Innovative Business Ideas.

Nine Basic Steps To Prevent Identity Fraud

Identity Fraud is one of the fastest growing crimes.

Identity Fraud is becoming a major problem and anyone can have their identity stolen and in a recent case in the paper the thief was the person’s sister.

With the amount of information about you on the internet and held by all sorts of organisations including the government, banks and suppliers (i.e. supermarkets etc.) you need to manage  the information you are giving out and try to keep it to a minimum.

The precautions to be taken are:

1 Never give personal information to someone who calls you on the telephone. Especially if you are not expecting the call. Banks, shops and companies may do cold calling for market research. If they say it’s for market research always ask for the phone number of the supervising body.

2 If you are interested in what they have to offer. Either check their identity by calling them back or ask them to put some information in the post.

3 If you have not had dealings with a company. Do Not give them personal information.

4 Always destroy any documents which a fraudster could use.

Bank and Credit Card Statements, cheque book studs and till receipts should either be shredded or burned and the ashes broken up.

I have an incinerator in which I have a fire about once a month to burn all my confidential waste. For me this includes accounts and envelopes which my name and address.

5 When you get emails requesting personal information. Delete them.

6 Don’t respond to emails that offer you amounts of money for using your bank account to transfer cash from banks in third world countries. These are scams and people have lost large amounts of money.

7 Always arrange for your mail to be re-directed when you move to a new address.

8 Keep a list of all your Debit and Credit Card numbers so that if you loose one you have the details to cancel the card. The earlier you inform the bank of a lost card the better.

9. Always check your financial statements, banks, credit cards etc and if possible check them online. The quicker you spot an error or misuse the better the chances of stopping it escalating.

If you follow the above steps, you have a good chance of avoiding identity and other frauds.

via UK Business Advisors Ltd | UKBA – Articles: Finance – Nine Basic Steps To Prevent Identity Fraud.

Sources Of Finance

How to get money into any business is a problem as old as the hills, so don’t feel that your situation is unusual. There are four main ways of achieving this:

1. Don’t overlook the obvious!

There are things you can do with what you’ve got that will bring money in to the business.

• Is your marketing up to scratch? Re-examine how you bring customers into your business. Run a test before you commit too much money to it. There are a hundred different ways of generating new business, so don’t think that you are applying them all at the moment.

• Are you collecting in your debts quickly? Even a small improvement in your debt collection can be a source of funds for your business.

• Are you extracting maximum benefit from your suppliers? Could you extend credit with them?

• Could you reduce stock levels? Could deliveries be closer to “just in time”?

• Are you sitting on under utilised assets? Do you have a freehold or machinery that you could sell and leaseback?

So look at the obvious things before you start looking elsewhere.

When you’re thinking of approaching banks and financial institutions remember:

• Have a decent plan to show them what you are trying to do

• They want your business. They have sales targets just like you. If you can put up a decent plan they will fight to get your business.

• Don’t leave it too late to approach these institutions. There are various different sources of funds from banks:

• Overdrafts: Never forget that this is a major source of revenue for a bank, and they want your business.

Make sure your bank manager knows what’s going on and they will be a lot more co-operative.

• Lease finance: This enables you to match the costs of buying the asset with the income you generate. However, do read the terms carefully and shop around.

Focus at what happens at the end of the lease as there are many options here.

• Factoring: Asset based debts can easily be assigned to a third party. This means they put you in finds immediately and collect the debt for you.

• Invoice finance: This is the same thing as factoring, except the customer does not need to know. This can be very flexible and do whatever you need.

• Loans: Again, presented in the right way, this can be an excellent source of finance, particularly as interest rates are so low at the moment. The small firms’ loan guarantee scheme may also be helpful in some situations.

3. The Government

Believe it or not, the government wants to help you grow. There are over 1,500 different types of grants available, and it is sensible to seek expert advice in teasing out what may be available. Main types are:

• People based: These tend to be support with training – such as the modern apprenticeship scheme for 18-25 year olds.

• Knowledge based: Various grants are available for research and development.

• Location based: The further you are from London the more likely grants are available. Again, this requires specialist help.

4. External investors

Do not assume that just because you have a good idea others will catch on quickly. Dealing with external investors is all in the presentation. You need something snappy to catch their interest and then well presented detail to hold their interest.

Typically investors can break into three categories

• Business Angels: These are people who have made money who would like to use that money to back others. They will typically invest from a few thousand pounds up to about a million. No hard and fast rules and they can be difficult to find, let alone close a deal with.

• Venture Capital Funds: These are interested in investments of at least £500,000, and often a lot more.

• Other Companies: Another company may well be interested in investing in your company – perhaps with a view to outright purchase in a few years time.

All of these options will want to have a share in your company, and with that comes a loss of control.

Be prepared to discuss this early on in any conversation.…and you must plan

To improve your chances of success in gaining additional sources of finance you must have something in writing. Often the very act of writing something down will help clarify a course of action. It will also help to explain your thoughts to others in a rapid and coherent way.

via UK Business Advisors Ltd | UKBA – Articles: Finance – Sources Of Finance.

3 Strategies For Increasing Profits

It’s a simple yet common question, “How can I make my business more successful?”

Success can mean a lot of different things to a lot of different people but when it comes down to it, the success of your business should only be measured by one thing – profit.

At the end of the day, it’s not how many people came in to your store or phoned in. It’s not even how many widgets you sold. At the end of the day, what truly matters is how much of a profit you made.

It would make sense then that your efforts focus on profit as the end result. With that in mind, there are only three strategies to increase profits for your business.

1) Increase the pound size of each order

2) Increase the number of times people buy from you

3) Increase the number of people who buy from you

Most likely, your business is already primed to attack each of these three angles and implementing that attack should be fairly easy.

Let’s say that you are the owner of Happy Wicks Candle Store. Let your customers know that for every £50 they spend they will receive a free 4-inch candle. When they are eligible for the free candle, offer them the option of upgrading the 4-inch candle to a 6-inch candle for only two pounds.

Implement a customer loyalty program. Whenever a customer spends £200 with your store they receive a 20% discount on their next order. Show loyalty to your customers, too. Create customer-only events and sales, even workshops on how to make candles at home.

Candles are also popular gifts.

Be sure to place your contact info on each and every candle. This makes it easy for the gift recipient to purchase from you. Be sure to also use this tactic when co-promoting with similar businesses such as a flower and bath and body shop.

Looking at the example Happy Wicks Candle Store, the tasks of increasing profits was not a difficult one. Truly, it’s a matter of putting systems in place that generate increasing profits.

Take a look at your business and  examine the systems you have in place.

Chances are, there are undiscovered profits laying about. Put systems in place to gather those profits and you’ll find your business reaching new heights of success.

via UK Business Advisors Ltd | UKBA – Articles: Finance – 3 Strategies For Increasing Profits.

Different Types of Funding