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Your EnterQuest Bulletin - Issue 205
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| Thought for the week: "Don't worry about people stealing an idea. If it's original, you will have to ram it down their throats." Howard Aiken |
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In this week's issue:
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Understand and improve your cash flow...before it's too late!
Running a profitable business is one thing, but having enough cash to pay the bills is an entirely different thing altogether. You can be making a profit, but if you haven't got your cash flow under control you are in danger of going out of business very quickly.
Businesses fail because they run out of cash. Yet this very basic point is simply not understood by many people that start and run a new business.
Every day of the year, a small business becomes insolvent, even while they're making a profit. The reason for this is because it is cash - not profit - that pays the staff wages, bills from suppliers and loan repayments.
If the cash isn't there at the right time of the month - every month - the bills can't get paid.
Simple enough?
Let's look at an example of this.
A small business owner goes online to look at his bank balance, which tells him he's got £5,000 in his account.
He's also confident that his business is now trading profitably because his sales levels for the last two months have been greater than his expenditure. He's seen that there's £5,000 in the bank so he thinks he can safely pay his supplier's bill for £3,000 of stock he received two weeks ago.
But can he?
Does he have enough information to pay the £3,000 based on what his bank balance tells him? Will it be right if he makes the decision based on his bank balance alone?
Well, let's assume he had paid another supplier £3,000 a week ago. Has the cheque he wrote to pay that bill cleared yet, and has it been deducted from the £5,000 that's showing on his bank balance today? If it hasn't cleared and it's not showing on his balance yet, he's actually only going to have £2,000 left when it clears.
What decision should he now make about paying the latest £3,000 bill? Does he have the right information about his real cash balance?
Now let's complicate things further. His business has also been making a lot of sales over the last two weeks, including a big sale of £5,000 which he invoiced about three weeks ago.
It was party time when the sale was made and the invoice went out. But was that the right time to celebrate? Has the cheque for £5,000 from the customer turned up yet? And even if it has, and the cheque was deposited three days ago, has that amount cleared yet, and is it included in today's bank balance?
The most important point to make here is that in business you simply cannot make decisions without knowing exactly what your cash position is today, and what it is going to be tomorrow, next week, in a month's time and at any point in the future.
Your cash balance (the amount of funds you've really got at your disposal) and your bank balance (which only includes cleared funds you've received and paid) are entirely different things.
If you understand your cash balance, you are able to make accurate decisions about spending in your business.
You should also be more proactive in controlling your cash flow by getting your customers to pay their bills more promptly. Here are a few tips to help you achieve this.
- Try offering a small discount for early settlement of a bill.
- Make it a top priority to chase outstanding invoices every week or possibly even every day.
- Try asking for a small deposit payment in advance, maybe around 10% or 20% of the total amount.
- Instead of offering 30-day payment terms, try 14 days or even seven days.
- Make sure you invoice your clients as soon as you make a sale, and also ensure the terms of the sale or contract are clearly detailed on the invoice so your clients can't claim confusion as a reason for late payment.
When you invoice your customers, it's your top priority to ensure you actually get paid and collect every penny owed to you.
And when it comes to the times in every month to pay your bills, you need to be sure, in advance, that you have sufficient cleared cash available for those bills to be paid.
In other words, if you're managing your business based on accurate cash flow forecasts, you're managing a business that you have under control.
Getting prepared for the new financial year
6 April is the first day of the new tax year, when you'll be sent your self-assessment tax return (SA100) form or notice to complete a return (SA316). It's worth taking the time now to prepare the information you need to complete the returns immediately, rather than waiting till the last minute and risking heavy penalties.
You should also take the opportunity to take stock of your paperwork as the new financial year begins, getting rid of clutter and making sure the records and information you'll need when you come to fill in your tax return are filed logically and securely.
Here's a quick list of where you can find out about the key changes to thresholds and limits announced in last week's Budget that will impact on your tax affairs:
- The HM Revenue and Customs (HMRC) site has updated its tables of income tax and National Insurance rates, which it compares against the 2006/07 figures so you can easily see what's changed.
- HMRC also has a number of Budget 2007 pages, providing links to detailed explanations of what has changed.
- A snapshot summary of the entire Budget can be found on the HM Treasury website.
- It's also worth visiting HMRC's dedicated web pages on tax self-assessment for guidance through the process of completing your tax return and paying the monies due.
Finally, the UK Insolvency Service has a useful guide to tax for self-employed people, which highlights key deadlines and explains how to fill in the relevant forms.
Each week we provide you with summaries of some popular or emerging business ideas in the UK and elsewhere around the world.
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Podcasting services have exploded in the past year. They're cheap and simple to set up, and easy for anyone with Internet access to receive, which has made them an appealing option for businesses seeking an alternative way to communicate with customers.
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'Ethically produced' food is one of the fastest-growing sectors of the market for food and drinks, with concerns over food miles and fairly traded produce of increasing concern to consumers. More ethical eateries such as restaurants and cafés that favour local suppliers, organic produce and healthy foods are springing up as a result.
Eco-business ideas
As consumers become more aware of their impact on the environment, demand for eco-friendly products and services is increasing. Trend-watching resource Springwise has ranked the top ten eco-business ideas that made an impact in 2006:
1) Eco-taxis - using hybrid cars with electrical engines to offer environmentally friendly cab services.
2) Household wind turbines - specially designed wind turbines that allow consumers to generate energy from their own homes.
3) Residential recycling - indoor disposal facilities that make recycling easier for consumers.
4) Eco-rentals - car rental services using only hybrid vehicles.
5) Eco-friendly fashion - handbags, clothes and accessories made from recycled products.
6) Adopt a tree - an Italian olive grove has led the way in eco-adoption by allowing customers to adopt one of its olive trees and receive all of the tree's produce in a year.
7) Recycling centres - drop-off centres that allow consumers to dispose of their electrical goods.
8) Carbon offsetting - contributing to carbon offsetting schemes via text message.
9) Green cleaning - cleaning services that use only non-toxic, environmentally friendly products that appeal to eco-consumers and allergy sufferers.
10) Sustainable entertainment - clubs, bars and restaurants that offer biological beer and Fair Trade products.
Regularly improving your vocabulary is not just about learning a new word and its meaning. It will improve your general knowledge and make you feel and act smarter in all sorts of personal and business situations.
Do you know the meaning of the word 'parochial'?
a) owning or in possession of
b) official or formal
c) limited in outlook or narrow-minded
d) fake or counterfeit
Answer at the end of the Bulletin.
The following topical business issues have been recently reported in the media. Did your radar pick them up?
1) Which type of Internet fraud was most prevalent in the UK last year, according to new Government figures?
a) Credit card fraud
b) Fraud when shopping online
c) General fraud
d) Bank account fraud
2) Which of the following was named as consumers' biggest concern about food in a recent survey?
a) The amount of salt it contains
b) The hygienic practices followed during preparation
c) The number of food miles travelled by supermarket produce
d) The complexity of nutritional information on food labels and packaging
3) Which technological advance is to result in changes to the Privacy and Electronic Communications Regulations 2003, which govern areas such as the sending of spam e-mails?
a) The increasing use of podcasting in business
b) The growing take-up of Voice over Internet Protocol (VoIP) phone systems
c) The use of Radio Frequency Identification (RFID) in the retail sector
d) The rising number of people engaged in blogging
Answers at the end of the Bulletin.
Around 93% of franchises make a profit
British franchise businesses have hit the record books in how well they're performing, according to a new study. Figures from the British Franchise Association (BFA) and NatWest bank show that franchises have a record combined annual turnover of £10.8 billion, and the market's value has grown by £500 million in the last year, and by 44% on a decade. British franchise outlets have an average turnover of £323,000, and some 93% are reported to be making a profit.
There are more security problems with eBay
An Australian fraud case has highlighted security problems with eBay. The man involved hacked into at least 90 eBay seller accounts last year, mostly by guessing users' passwords and breaking into e-mail accounts. He particularly targeted users with good feedback ratings, as posing as a seller with a good reputation made it easier to dupe buyers. The hacked accounts were used to advertise goods such as non-existent iPods, and the equivalent of around £17,000 was stolen before the perpetrator was caught. eBay claims it is testing a more secure login system for its PayPal payment bureau.
Help with handling workplace conflict
Advisory and conciliation body Acas has published new guidance to help businesses manage conflict in the workplace. The free booklet covers the signs, causes, management and prevention of conflict at work, and also explores the sources of help and mediation available. Acas reports that employment tribunal claims cost an average of £20,000 per employer each year, with many claims starting with the mismanagement of employee problems and badly handled disciplinary processes. The guidance has been produced on the back of a new Government consultation into simplifying the tribunal process.
Food guidance for ethnic caterers
The Food Standards Agency (FSA) has published guidance on food safety for caterers of ethnic cuisine. The guidance forms part of the FSA's 'Safer food, better business' (SFBB) project, which aims to provide practical information to help caterers follow safe and hygienic food preparation practices. Two new guidance packs have been developed: one for Chinese cuisine, and one focusing on Indian, Pakistani, Bangladeshi and Sri Lankan cooking.
New safety scheme for small food suppliers
The Safe and Local Supplier Approval (SALSA) scheme aims to make it cheaper and easier for small producers to supply to local retailers and public institutions like schools, hospitals and prisons. The initiative helps small firms ensure their safety procedures are up to scratch, without it costing an arm and a leg to do so. The British Retail Consortium (BRC) reported that the scheme should help retailers and caterers expand their ranges of locally produced food "safe in the knowledge" that relevant regulations had been met.
This book focuses on effective business communication. It argues that most forms of communication - from meetings, pitches, presentations and networking sessions to flyers, brochures and sales letters - contain too much detail and not enough relevance. This, says the author, is like "filling a bucket with jelly, flinging it at your audience, and hoping some of it sticks". The book covers simple, memorable and free techniques for improving your communication. It's packed with practical exercises, quizzes, tips and case studies. Check out:
Just one word answer
The answer is c).
Parochial means limited in outlook or narrow-minded, particularly with regard to matters that directly affect only a particular individual or locality.
Local newspapers are often criticised for being too parochial in their reporting of news. |
How's your business radar answers
1) The answer is b) - Internet fraud affected 12% of people using the web last year, according to the latest figures from the Government's Get Safe Online project, with fraud committed while shopping online affecting 6% of Internet users.
2) The answer is a) - the amount of salt in food was a concern for 54% of consumers questioned in the Food Standard Agency's (FSA) major annual report.
3) The answer is c) - concerns have risen over how the data generated via RFID chips, which are used in retail to monitor stock, deliveries and sales transactions, is used by businesses. The Government has said it will amend the 2003 Regulations as a result. |
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Good luck
The EnterQuest Team
This information is meant as a starting point only. Whilst all reasonable efforts have been made, the publisher makes no warranties that the information is accurate and up-to-date and will not be responsible for any errors or omissions in the information nor any consequences of any errors or omissions. Professional advice should be sought where appropriate. |
