It’s all about the cash
Meghan Trainor’s song said its “All About That Bass” but in business, we know that in reality, it’s all about the cash. This week’s webinar focuses on how to find the cash in your business and suggests some questions that every business owner should be asking on a regular basis.
It also focuses on borrowing for working capital where appropriate and explores different funding methods.
The webinar is delivered by BizSmart Select Member and Core Advisor Ian Priest, who has 39 years experience in banking and business finance and is ideally placed to guide businesses through the maze that is business finance.
Why do we say “It’s all about the cash?” Well, many profitable businesses have hit major problems due to poor cash flow, and some have even gone under. So it’s vital to ensure you have enough working capital in your business.
It’s important to remember that it’s the cash that is generated from profits that repays debts, pays dividends and allows you to invest in your business. So the first question you should be asking about your business is this:
“Am I making the right level of profit?”
Without sufficient profits, managing your business finances becomes challenging.
If you’re sure that your profits are at the right level, then the next thing to look at is where the cash is going. After all, there are a limited number of places the cash can go:
- Fixed assets
You need to be very honest with yourself and ask yourself whether the dividend levels are appropriate. Are you stripping too much cash out of the business?
It may seem that there isn’t much you can do about tax levels but is that the case? Could you claim R&D tax credits? Are there any allowances you can claim? Are you on the correct VAT regime?
Are the current stock levels appropriate and is there any old or dead stock you could offload? Can you change your procedures so that you require less stock i.e. move to a Just in Time system?
Debtors and Creditors
Are you collecting your debts efficiently?
Could you improve your credit control processes to minimize bad debts and speed up collection?
Whose terms of trade are you using – yours or theirs?
Avoid offering discounts for prompt payment
Are you paying your suppliers too early? Can you extend your credit trade terms?
Are your fixed assets – buildings, machinery and vehicles – being fully utilised?
Do you still need all of your fixed assets?
Are you spending on things you don’t need?
Only when you have examined every other aspect of the business for cash should you think about borrowing. After all, it could be that by ensuring prompt payment and extending your credit terms with suppliers that you free up the cash in your business that you need.
BizSmart aims to help SME and micro-business owners scale their businesses and create value through sound practical business support. We aim to give you insight and clarity and fire up your determination to succeed. You can access blogs like this and more besides through our free SmartRoom service here.