The importance of cashflow forecasting during a crisis

During the ongoing coronavirus pandemic, many sectors are seeing income either disappear completely or drop to dangerous levels. To be able to navigate the future path of your cashflow, you need to start forecasting – so you can map out your financial position over the coming months and can take the appropriate action to safeguard your cash position.

Forecasting your future cash pipeline

Projecting your cashflow pipeline forwards during a crisis is vital. Having access to detailed forecasts helps you to scenario-plan, search for cost-savings and look for strategies that will preserve your cashflow position.

Remaining in control of the cash coming into (and going out of) the business is the real focus, so you can accurately predict your financial position and can resolve any issues.

7 Key ways to get more from your forecasting

  1. Run regular forecasts – The financial landscape is changing on a daily basis at present. A cashflow forecast is not a document that remains static. Variables and external drivers are literally changing each day, so it’s vital that you run frequent forecasts and react swiftly to any projected cash issues as they become apparent.
  2. Use the latest cashflow forecasting apps – cashflow forecasting apps, like LivePlan, integrate with your Xero or QuickBooks accounts, giving a detailed view of how your cash inflows and outflows will pan out over the coming months – information that will inform and justify the decisions you make during these extremely challenging times.
  3. Explore the right revenue streams – most sectors will have seen their face-to-face sales drop to absolute zero since quarantine restrictions came into place. To overcome this, there’s a real imperative to explore revenue streams and new opportunities for income. An example of this is coffee shops that now sell roasted beans online (this will depend on lockdown restrictions). The idea is to find ways to increase the money that’s coming in the door and balance out your unavoidable expenses.
  4. Get proactive with cost-cutting – if you can reduce cash outflows to a minimum, that will have a real impact on the health of your future cashflow. Scale back your operations and aim to reduce things like unnecessary software subscriptions, or over-ordering of basic supplies. Negotiating cheaper rates with suppliers, if possible, will also help.
  5. Review your staffing needs – There will be challenges with the Furlough Scheme coming to an end, but, now’s not the time to make anyone redundant. Employers can look at ways to reduce the costs of staffing and resourcing. Reducing working hours or redeploying staff in different roles are all options that reduce payroll costs, while also looking after your staff’s welfare.
  6. Run a variety of scenarios – changing the financial drivers in your forecast model allows you to scenario-plan different strategies and options. Many of these will be in a long-term plan when restrictions ease. Scenario-planning lets you answer questions and will give you some hard evidence on which to base your decision-making and strategic outlook over the coming months.
  7. Look at various ways to access funding – if forecasts show a giant cashflow hole coming up, you’re going to need additional funding to get through this crisis. We can assist your business to investigate funding opportunities from grants, banks, loan providers, alternative lenders and crowd-sourcing funders.

Talk to us about setting up cashflow forecasting

Forceasting is an important step to give you the business intelligence to support your decision making.

Get in touch to improve your control over cashflow.

Reinventing Your Product and/or Service Post-Covid

During times of crisis, we’re forced to reinvent the way we work and what we work on to remain sustainable. From technology adoption to product innovation and blowing up stale processes, a crisis forces us to start with a fresh page and plan for a better, more resilient business.

Four ways to reinvent your business post-Covid:

1. Innovate. Defined as ‘the introduction of new things, ideas or ways of doing something’. What new behaviours or needs exist in your target market and how can you create a new product or service to meet these needs?
2. Re-engineer. How can you change and improve the design of your current offering? How can you produce it better, in a way that reflects your customers’ changing needs?
3. Adapt. How can you change the way you deliver your products or services in this new business environment? Adapting your opening hours, the sales process or your follow up support options are examples that may help establish a new ‘normal’.
4. Widen your lane. Do ongoing supply disruptions or changes to competition provide the opportunity to extend your offering? What expansion opportunities have presented themselves as part of the post-Covid landscape?

Remember, you’re defined by what you say ‘no’ to as much as what you say ‘yes’ to. Test the market, reach out to loyal customers and seek how you could innovate, re-engineer, adapt or widen your lane to continue being their brand or supplier of choice.

Innovation is a key part of your Business Recovery Plan.

Send us an email to receive a link to watch our Business Recovery Planning Webinar, it’s full of valuable content which is extremely timely given the current economic climate.

Optimum salary for company directors in 2020-2021

Salary & dividends for director

At gHawk Accounting we believe the business is there to serve the owners, and not the other way round. One of the advantages of being a business owner is that you can set your own pay package at a level that meets your lifestyle needs and keeps tax to a minimum. In this article we will cover the optimum options for paying yourself with a combination of salary and dividends while maximising on your untaxed allowances.

What are dividends?

‘Dividends’ is the name given to money paid out to investors who own shares in a company. These investors are called Shareholders. Dividends are the distribution of a company’s residual profits after tax. As a shareholder, you may take dividends as a form of remuneration. Dividends are taxed differently to your salary. 

New tax rates:

Every tax year the government announces the tax rates for the financial year. It is important to know the prevailing tax rates when deciding how to pay yourself and how much to pay yourself as this will have an impact on how much tax you pay. This is called tax planning. For directors who are also shareholders, the best strategy is usually a combination of a salary and dividends.

For 2020-21, personal allowance (tax free earnings) remains £12,500 same as 2019-2020.

The tax rates for 2020-21 are as follows:

  • £12,501 to £50,000                          20% 
  • £50,000 to £150,000                        40% 
  • £150,001 +                                        45%

Dividend allowance remains at £2,000 and any dividends in excess of that will be taxed as follows:

  • You won’t pay tax if your unused personal allowance covers the additional dividend taken
  • Dividends in the basic rate tax band will be taxed at 7.5%
  • Dividends in excess of basic rate tax band will be taxed at 32.5%
  • Dividends within the additional rate band (income over £150,000), will be taxed at 38.1%

Most company directors will opt to pay themselves enough of a salary to satisfy their National Insurance stamp in order to protect future entitlement to state pension. Additional funds are then taken as dividends for maximum tax efficiency. When paying corporation tax, your company will save 19% on any salary taken. The director then takes dividends, which do not technically save on corporation tax, as they are declared after tax – but they do save on National Insurance as dividends are NI exempt.

Employment Allowance

Employers can claim are able to claim the Employment Allowance (EA) in order to reduce their employer Class 1 National Insurance contributions. The rules regarding which businesses qualify for the EA changed from April 2020. 

From 6 April 2020 the Government has proposed that the EA will be £4000 an increase from £3000 in 2019-20  

To be eligible for Employment allowance:

  • the company must have more than one employee on payroll who is not a director
  • and the employers’ Class 1 National Insurance liabilities were less than £100,000 in the previous tax year.
  • If part of a group or have multiple PAYE Scheme, the total employers’ Class 1 National Insurance liabilities for the company or group of companies must be less than £100,000
  • If receiving state aid, the Employment Allowance claimed must not exceed the de minimis state aid threshold for your sector

Optimum Directors Salary 2020-21 – Option 1

When it comes to tax efficient salary levels for 2020-21 there are now three national insurance thresholds you need to be aware of

  • Lower Earnings Limit – if you pay a salary above this you are protecting your entitlement to future state pension and benefits, without paying any national insurance. For 2020-21 this is £520 per month, £6,240 for the year
  • Primary Threshold – if you earn above this you personally must start paying national insurance – for 2020-21 this is £792 per month, £9,500 for the year
  • Secondary Threshold – if you earn above this your business must start paying national insurance – for 2020-21 this is £732 per month, £8,788 for the year

A major change for the 2020-21 tax year is that the Secondary Threshold is lower than the Primary Threshold – this means that the optimum level for the purposes of this article is to go up to the Secondary Threshold but not any higher.

Therefore, we would suggest a monthly gross salary of £732 which stays just below this threshold and means no national insurance deductions. This way you pay yourself a salary of £8,788, you can then take dividends of up to £41,212. (Which is within the basic rate band of £50,000). These dividends will incur £2,663 of tax.

Overall, you will take home £47,337 after tax – with a saving of £1,670 in corporation tax.

Optimum Directors Salary 2020-21 – Option 2

If you can claim Employment Allowance, there is a little more administrative effort involved in this process, but you will still save money.

If you pay yourself a salary on £12,500, you will pay employers National Insurance – at £512.26. When taking £12,500 in salary, your Employment Allowance cancels out your employers National Insurance contribution. You will still have to pay employee’s National Insurance at the lower rate of £360. Leaving you with a corporation tax saving of £2,375 less the NI of £360 – hence overall you will be £345 better off compared to Option 1 above.

Comparing the two options:

  Option 1 Option 2
Salary            8,788          12,500
Dividends          41,212          37,500
Total          50,000          50,000
Employees NICs on salary                   –                  360
Employers NICs on salary                   –                  512
Employment allowance                   –   –             512
Tax on dividends            2,663            2,663
Corporation Tax saving –         1,670 –         2,375
Total tax                993                648
Take home          49,007          49,353
Option 2 is better off by:                  345

If you’d like to know more about how you can maximise your earnings and take advantage of tax efficient planning, please get in touch today.

Support available for businesses due to COVID-19

The impact of the ongoing coronavirus pandemic on businesses is unsettling and evolving fast.

At gHawk Accounting, we are working hard to support our clients starting with those with the greatest need. Our team is fully set up and working from home as our software is cloud based and can be accessed over the internet.

Below is a summary of the help available from the government to support businesses affected by Covid-19.  We will continue to update this page as more information is released on the support schemes available, who is eligible and how to get the assistance.

Full details are available on this government page

Ask gHawk: COVID-19 Frequently Asked Questions

We will update this page with questions we are receiving from our clients, so feel free to message us with your question and we will add to our Frequently Asked Questions.

Am I self-employed or employed?

A self-employed person trades in their own name as opposed to through an intermediary e.g. a recruitment agency of company. So, if you are a director or shareholder of a limited company and the company runs a Pay As You Earn (PAYE) Scheme – then you are an employee, and not self-employed

How do I get the support if I am self-employed?

You can claim a grant of up to £2,500 per month through the coronavirus (COVID-19) Self-employment Income Support Scheme

How do I access the grants recently announced?

Refer to the image above -your local council will write to you if you are eligible.

What taxes can I defer

You can defer VAT payments from 20 March 2020 to 30 June 2020. Income tax payments due under the self-assessment system may be deferred until January 2020. If unable to pay any other taxes, you should apply for a Time To Pay arrangement by calling HMRC on 0800 0159 559

What if I can’t pay the rent for my commercial property

The government has introduced Protection from eviction for commercial tenants who cannot pay their rent because of COVID-19 will be protected from eviction.

These measures will mean no business will automatically forfeit their lease and be forced out of their premises if they miss a payment up until 30 June.

There is the option for the government to extend this period if needed.

This is not a rental holiday. All commercial tenants will still be liable for the rent. Commercial tenants are protected from eviction if they are unable to pay rent.

I am an employer and may have to lay off employees as our work has run out. What should I do?

You can access up to 80% of your employees’ wages up to £2,500 per month through the Coronavirus Job Retention Scheme. This allows an employer to ‘Furlough’ their employees for up to 3 months from 1 March 2020. Furloughed employees cannot provide services to a business, otherwise a claim cannot be made under the scheme.

I am a director of a company and pay myself a salary and dividends. Are my dividends covered by the coronavirus job retention scheme?

No Sadly dividends is not covered by the scheme, but your salary is.

How can I apply for the Corona Virus Business Interruption loan?

All major banks are now offering the scheme. Speak to your bank or visit the British Business Bank website to find out the participating banks.

Ideas for Planning Your New Year Over Christmas

Plan your new year over Christmas

With 2020 approaching its time to be thinking of some new year’s business resolutions. If you don’t know where to start have a look at our Christmas e-book for some ideas, it will help take the stress out of planning.

We are all entitled to a successful 2020, this way you can put your best foot forward.

Responsibilities of a Company Director

Responsibilities of a Company Director

No matter the size of your business, as a company director, you take control of all the pivotal decisions. Whilst it might be daunting, it can also be extremely rewarding – as long as you know what you’ve signed up for.

We’ve put together a list of the major responsibilities you should know about before you say ‘count me in!’.

1.Upholding the company’s constitution

Think of your business as its own little country or state. Within that land mass, there are rules which must be followed by everyone which inhabits it, including the leaders. When you establish a company, you draw up these rules as ‘articles’. As you continue to operate the business, you must abide by these articles at all times. If you overstep the mark or exceed your powers, your decisions could be reversed.

For example, there be several stakeholders or directors. Under one of the company articles, it may state that a certain number of stakeholders or directors must vote of actions before they are taken. As the company director, you must stick to this rule too.

2. Promoting the company’s success

Under the Companies Act 2006, a director of a company “must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole”. In this sense, ‘promoting’ doesn’t mean advertising – it means acting under the best interests of the company. This may include looking after relationships with clients, stakeholders, employees and suppliers. It also refers to sensible economical and environmental decisions which do not endanger the company, the employees or the environment.

3. Operating with reasonable care, skill and diligence

Similar to the above rule, directors are expected to have a level of skill with which to conduct the running of a company. If someone is not skilled, they may prefer to take on other director’s with specific specialisms – such as law or accountancy.

Under ‘reasonable care’, you may consider taking out various insurance policies to protect the business and it’s dependants. You must also uphold the company’s constitution, as stated above, in order to be directing in a diligent manner.

4. Exercising independent judgement

As stated above, there is a presumed level of skill when you become a company director. It is not the role of the director to simply implement the thoughts and suggestions of stakeholders. As a company director you must take a very active role in the decision making process and have a clear and concise vision for the company’s future. If you do not know, yourself, where the business is going, it will be very difficult to direct others in how to operate it.

5. Disclosing conflicts of interest

There are several different types of conflict of interest. This might include relationships with friends or family, in conjunction with your business. As a director, you may not accept benefits from a third party – as this could be considered a conflict of interest. If you feel there may be a potential conflict of interest, you are supposed to be fully transparent with other directors and stakeholders, allowing them to have a say in how the situation should be handled. Failure to make these conflicts known could result in a director being struck off.

6. Keeping up to date records

In order to prove your compliance with your responsibilities as a director and the constitution of the company, you must become very organised with keeping records. For every action or decision that is taken in the business, you should keep a note of it. If you have multiple directors or stakeholders, take minutes at meetings and make them accessible to all pivotal parties involved. This protects the company and yourself – for example, in the event that someone questions a decision that was made, you can display evidence that the issue was debated and deliberated appropriately.

If you’re ever concerned about your responsibilities as a director, it’s best to seek legal counsel, look up specific legislation or check with HMRC. When it comes to making financial decisions, of course, we would recommend that you seek out a suitably qualified accountant

25 Principles of excellent financial management – For business owners – Part 2

principles of financial management 2

25 Principles of excellent financial management – For business owners – Part 2

Following on from our post at the beginning of the month, we’re covering the next 10 steps to great financial management for your small business.

From tools of the trade, to tips and tricks we’ve studied – you need these practices in your business today!

11. Look after your credit score

It might seem like a no brainer, but your credit score is important. As a business owner, you may want to borrow money or lease equipment. Alongside your business plan and proof of earnings, a good credit score can help to support you when go looking for help. You can check on your credit score easily using tools like Experian.

12. Set ambitious but realistic goals

There’s nothing wrong with setting your sights on a six-figure business or million pound turnover. However, it’s best to keep your goals regular, consistent and realistic. You don’t want to be feeling disheartened when you see how far away you are from your target number.

13. Review expenses regularly

Do you know how much you’re spending? Signed up to subscriptions you no longer use? Paying for a service that isn’t bringing in a good ROI? Get to grips with your expenses and know exactly how much it’s costing you to run your business. If you fall on hard times, you’ll know where you can cut back.

14. Pay all bills on time

You want your figures to be as up to date as possible. Try to pay bills as soon as possible to ensure that the figure in your business bank account is accurate. Leaving bills unpaid could lead to interest or a huge list of expenses to settle at once.

15. Assess different payment types

Depending on how your customers pay you, it might be worth shopping around when it comes to payment providers. For overseas clients, portals such as Stripe and PayPal may be a safer option. However, most third party payment portals charge a fee or offer poor exchange rates. Be sure to investigate the most cost-effective option for you.

16. Check in with your business plan

Are you on track? It’s hard to know how you’re doing if you’re not touching base with your business plan every now and then. Make time, at least quarterly, to sit down with your business plan and see how you’re doing.

17. Think about your pension

Another thing to speak to your accountant about is how to manage your pension. If you are self-employed or running a small business, this is your responsibility. There are many different ways, means and schemes for collecting a pension – but ask a financial expert for customised advice.

18. Know your day to day costs

Managing your finances comes down to the nitty-gritty. Ever heard the saying ‘look after the pennies and the pounds will look after themselves’? – that applies in business too. Fans of The Lean Start Up recognise the importance of keeping your day to day costs down, knowing the benefits will accumulate later.

19. Get the right funding

Depending on the type of business you’re in, and how long you’ve been operating, there are various options when it comes to getting funding. For innovative new products, there’s Kickstarter and other crowd-funding options. For businesses who want to scale, there’s AngelList. For many, it starts with borrowing from friends and family. Ensure that you’re aware of the interest rate and pay-back terms with any investment. If you’re concerned, run it by your accountant first.

20. Find a great accountant with a track record

By far the most useful tool when it comes to financial management, is a trustworthy accountant. Getting to know you on a personal level allows your accountant to recommend the best possible products and avenues, based on your individual needs. When choosing an accountant, see if you can find out what other businesses they look after. Do they have a long, positive track record? Do they have good client testimonials and a professional looking online presence? Be selective and don’t be afraid to ask lots of questions.

Thank you for checking out our top 20 tips for great financial management. Didn’t see the first 10? Check out that post, here.

Got any questions? Find us on Facebook, Twitter and LinkedIn. We’d love to hear from you!

20 Principles of excellent financial management – For business owners – Part 1

principles of financial management

20 Principles of excellent financial management – For business owners – Part 1

As a small business owner, there can be a lot to remember when it comes to finances. For some, this is second nature. For others, learning good financial management practises is a totally new ball-game.

Whether you are being supported by an accountant or not, it is very important to have at least a basic understanding of managing your money. Split into two parts, here are our first top ten tips for keeping your finances in tip-top condition.

1. Keep your business and personal transactions separate

Known by accountants as ‘economic entity assumption’, this process makes your accounting far simpler. By having separate bank accounts for yourself and your business, it’s easier to calculate expenses, earnings and just about everything else, without spending hours trawling through your bank statements. Treat your business as a separate ‘entity’, not an extension of your personal finances.

2. Date everything & run reports with similar timeframes

Every piece of financial collateral should be dated. Whether it’s statements, invoices, reports or receipts – put the full date on everything. If money was to ever go awry, or your accounts weren’t tallying up, a full timeline of your income and outgoings will help to alleviate concerns quickly.

3. Don’t confuse cost and value

Known to accountants as ‘cost principle’, this term refers to how items are recorded in financial reporting. Say your business bought a building and the value of the property sky-rocketed, your financial reports would only take into account the price you paid for the property. Value is reflected in the gain or loss when selling an asset.

4. Full disclosure with your accountant

Otherwise known as the ‘full disclosure principle’, this refers to the relationship between yourself and your accountant. You should disclose all financial information to ensure that your reporting and account management is always correct, up to date and meticulously accurate.

5. Always prepare for tax

No one wants to think about tax before it’s due, but it’s a great habit to get into. To protect your cashflow, many accountants will recommend that you syphon off a percentage of your revenue into a separate account. When your tax bill comes around, the money will be ready and waiting – preventing any surprise costs.

6. Pay yourself weekly/monthly

When you first start in business, this may not be feasible. Later down the line, the amount you pay yourself may still fluctuate. However, if you pay yourself on the same day of the week or month, it’s much easier to track your earnings and calculate your living costs. The amount may vary, dependant on turnover, but the date can remain the same.

7. Have a billing strategy and payment terms

In your billing strategy, you should invoice on a particular day of the week, offer inflexible payment terms (14 days, 30 days etc.) and impose financial sanctions for late payments. For example, you could explain that you charge a 10% surcharge on all invoices over a week late. It might seem harsh, but poor cashflow management is the number one reason that small businesses fail.

8. Check in on your books

In order to operate good financial management practises, you need to know what’s going on in your bank account. Using an online accounting system (such as Xero or Quickbooks) allows you to touch base your finances, whenever you want! Make it a habit to get friendly with your accounting once or twice a week.

9. Understanding your cash flow

In any business, there will be peaks and troughs throughout the year. If you are paying attention to your finances and keeping track of your income, you’ll know exactly when your peaks and troughs are. If you are quieter over the winter, you could start putting money aside in the busy summer months. Understanding your cashflow, when it’s flowing and where it’s flowing from, is incredibly important.

10. Understand your reporting

Speak to your accountant about the difference between your balance sheet, income statement, cash flow statement and revenue forecast. Once you’ve got a grip on how all these reports work together, you’ll find it easier to get the information you’re looking for.

Stay tuned at the end of this month for ten more expert tips from the GHawk team. Got any questions? Find us on Facebook, Twitter and LinkedIn. We’d love to hear from you!

7 ways to incentivise your employees and make them happy!

7 ways to incentivise your employees and make them happy!

Employee retention is incredibly important – as is creating a pleasant and happy work environment. One of the ways in which we can do this is by offering incentives to our employees – making them aware of just how much you value them.

  • Throw staff parties

At certain points in the year, it’s nice to offer your employees the chance to celebrate their achievements. You can throw 1 party a year (on a recurring basis) and be exempt from paying tax if the cost is under £150 per head. You can throw more than one party without needing to pay tax on it, if the combined cost of all the parties is under £150 per head. Summer BBQs and Christmas parties are popular ways to give back.

  • Offer company cars

In a variety of companies, employees are offered a company car. Many employees look for companies which offer this incentive as it’s an easy way to save money on their outgoings.

  • Allow flexible working hours

Growing in popularity, flexible working hours allow employees to ‘flex’ their days. This might mean taking a morning off and making it up over the week, or shifting their working day an hour earlier or later. Plus, 87% of professionals think having a flexible job would lower their stress and 97% say a job with flexibility would have a positive impact on their overall quality of life. Offering flexible working means your workforce will take less time off, because they can fit their job around their appointments.

  • Open up remote working

It is predicted that half of the UK’s workforce will work remotely by 2020 – why? Because it’s great! Employees love the freedom and save money on costly commutes. Not only that, but it’s a great benefit to company owners too. Save money on overheads such as office space, catering, utility bills and services.

  • Establish an employee rewards scheme

Keep staff motivated with regular awards and rewards. Whether that’s by offering them profit-shares or giving prizes to the employee of the month, you’re simply providing a benchmark for staff to aim for. Rewards for great work encourage more great work – which is all the incentive you need as an employer.

  • Offer training opportunities

You know the saying, “the only thing worse than training an employee and having them leave, is to not train them, and have them stay.” By investing in training for your employees, you’re investing in your company’s future. Poorly trained employees aren’t going to do a perfect job – so why would you expect them to?

  • Prioritise a good work-life balance

Check in on employees who are staying late, offer mindfulness or yoga sessions once a month, offer a good rate of holiday and don’t give employees work to do in the evening or on weekends. Burnout isn’t just their greatest fear – it should be your gravest concern.

As an employer, it’s easy to prioritise profits over culture. However, a positive working environment will have an incredible impact on your employees productivity. High staff turnout, burnout and a tense office vibe is not conducive with great work.

If you’re looking for ways to free up capital to reinvest in your staff – we can help. At gHawk, we’re not just accountants. We’re here to make a real difference to our clients. Take a look at our business development services and let’s start incentivising!

I’m making a profit, why don’t I have any money in the bank? – Difference between profit and cash

I’m making a profit, why don’t I have any money in the bank? - Difference between profit and cash

You’re working like crazy and sending out invoices left, right and centre. However, the money doesn’t seem to be piling up in your bank account – why is that? Usually, it’s poor cash flow understanding and a lack of processes that leaves business owners confused about where our money is.

Breakeven point…

In order to know how much money you need to make to make a profit, you need to know the cost of producing your services – this is called the breakeven sales point. The breakeven is the point at which you’ve covered all of your expenditures, so you’re left with pure profit.

To work out the cost of producing your product or service, you need to take all of your expenditure into account. This might include materials, labour, rent, wages etc. Once you’ve documented all of these costs, you’ll have a better understanding of how much you need to sell in order to make a profit.

Timing your cash flow…

Cash flow is all about timing! If a load of bills land on your desk beforethat big invoice has been paid, you might be in a spot of bother. Poor cash flow is a big reason why one in every four businesses doesn’t make it past the first year. In order to combat poor cashflow and cashflow issues, you need to ensure a constant stream of income. This doesn’t mean you just have to sell more, you have to be savvy with your payments. Try to keep invoice terms as short as possible and try to invoice as soon as the work is completed. If you use suppliers, do the opposite. Negotiate the longest possible payment terms to allow for money to come in, before it must go out.

Preparing ahead of time…

Another reason that there may not be a build-up of cash in your bank account is because you aren’t preparing for big bills. Plan ahead and put money aside every month to cover taxes. If you save 20% of your earnings, you’ll always be ready to pay your tax return when it’s due. Failure to pay your tax return on time can result in fines and penalties – further damaging your pocket.

Putting your prices up…

If you’ve carried out the above steps and you find that you’re still struggling to make ends meet, you may simply not be charging enough. In order to work out how much your prices need to go up by, try calculating preparing a cashflow forecast with different percentages of prices increases e.g. 5% higher, 10% higher, 20% higher etc. You may not need to up your prices by much to see a return.

If you are genuinely working as many hours as you can, but you’re still struggling – something has to give.

The number one thing to remember when trying to increase profits, is the difference between profit and cash.

Cash = The money you make on sales i.e. the money that comes in to your bank account.

Profit = The amount left over after you deduct all of your expenditure and costs.

If your cashflow is positive, you’re bringing in more money than you’re sending out. If your cashflow is negative, this means you are making a loss and no profit.

If you’re still struggling, check out some of our resources or speak to us about a complimentary client review where we can assess the holes in your business plan, cashflow and money management.