Small businesses often focus on how much money they are going to make, the amount of turnaround and, significantly, how much profit their business is going to generate. However, in looking at the bigger picture, many small businesses lose sight of the day-to-day cashflow of their business; which can cause major problems for both fledging and established businesses.

Of course, as a business it is vital to have clear figures with regards to cash projections and the amount of money you plan your business will generate. However, if your cashflow is not under control, your business can ultimately lose out regardless of whether your profit figures show you as “in the black”.

Cashflow is, if the correct tools are used, an easy thing for you to keep an eye on. It doesn’t have to be time consuming or laborious, but could ultimately be the thing that keeps your small business afloat.

Cashflow is, very basically, the balance of money coming in versus money going out. For example, if you order a large amount of stock on day one with an invoice that has to be paid at day 30 that is outgoing funds. If you fail to sell the stock before the invoice is due to be paid then your cashflow is unbalanced; you have more money going out that you have coming in, and for some small businesses that can be disastrous.

There will be times, with every small business, that investment is necessary; stock and supplies need to be bought (in most cases) before they can be then sold on to our customers. However, this can easy cripple a business if cashflow is not being accurately recorded and taken in to account.

Small business owners often struggle with lack of time; their main focus is on growing their business, and quite rightly so. That is why my company, WinWeb, have developed a cashflow tool especially designed for busy small business owners, to make it easy for you to see just how your balance sheet is looking at the click of a button.

However you decide to keep an eye on your cashflow, make sure that you always keep one eye on the scales to give your small business a great chance of staying afloat.

For the latest information about SME Technology, follow me on Twitter or become a fan of WinWeb on Facebook. I look forward to connecting with you!

With credit availability non existent or in sharp decline, a more transparent relationship between suppliers and customers is needed to overcome the credit hurdle.

In times when money is short a very open relationship based on partnership will allow a chain of suppliers and customers to fulfill orders in a “joint venture per order” kind of way. This will allow small and medium size business to compete successfully with bigger business and take the order. Everyone in the chain has to agree to get paid when the order is finally fulfilled.

This is however not going to solve the problem of financial difficulty in businesses for historic reasons or based on too high fixed cost. In these times cash-flow is more essential than ever. So outsourcing and reducing fixed cost is paramount at every juncture.

I have been talking about the fact that we live in a time of business partnerships, the traditional supplier – customer relationships do not work anymore. This has never been more true than at the moment.

How are you partner skills, I hope for you, they are good. –ST.

A report by the Bankers Automated Clearing Services (Bacs) found that the late payment burden on UK small business and start-up business, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer- or Personal business, like professional, contractors, freelancer, self-employed, sole-trader and virtual assistants, has risen £2.6bn in the past 12 month to an staggering £18.6bn.

There is good news and there is bad news – the good news is that small businesses suffering from late payments has decreased from 59% to 51% in the past 12 month.

Combine this fact with the findings in the first paragraph and you will easily see the bad news, or as I would put it the really bad news. The average amount now owed to each company at a anyone time is 30,000, up from 22,000 in 2006. It is not surprising that 29% of the respondents to the survey said they could go bust if faced with overdue invoices of £20,000 or more.

While I have no illusions that this current government shall support small business, as some in the survey suggested that public sector bodies were the worst late payers. But maybe the Shadow Chancellor Mr George Osborne, could get his teeth into this problem.

It is not without reason that we have fallen behind France in the economic world-ranking. ST.

This question is hard to answer, because there are no simple answers here and the outcome of this situation could easily be fatal to the business and if you are personally guaranteeing this money – and you probably are – this could potentially be very serious for your personal life too.

The things that you need to do, in my opinion are:

• Find out why? If the reason given are not satisfactory, you will need to get legal advice.
• Try and extent the deadline? If that is possible reduce the overdraft as soon as you can, or negotiate a stepped reduction of the O/D limit, ie. by month or week.
• Try and change bank, ASAP.

People often believe it is somehow always their fault, if the bank changes their attitude towards them, that is not always the case. Banks will always try and make you believe it is, but in reality they my have new internal guidelines for handing out money – banks can get into “cash-flow” problems too. So – don’t automatically assume it is always your fault.

Banks may have the right to recall a loan or overdraft, but I’m not sure if they have the right to damage your business by doing so – especially if the reason for the recall is not your doing. So if it comes to the crunch, get legal advice. This is one of the reasons why I hate these, IMO, often legal but still unreasonable arrangements between banks and clients.

Many years ago someone made the the loan, O/D – umbrella analogy and it goes like this:

When the sun is shining your bank gives you an umbrella;
when it is raining, they need the umbrella themselves.

It is best if you do everything possible to not need banks in the first place, by bootstrapping, outsourcing, planning your business and keeping your fixed costs as low as possible.

Remember sometimes, attack is the best defense even with banks, they may need their money, but they do not need bad publicity either. ST.

A virtual credit controller is someone you have outsourced your credit control work to for execution. Needless to say that credit control is one of the most important functions in any small business and start-up business, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer- or Personal business, like professional, contractors, freelancer, self-employed, sole-trader and virtual assistants, it affects your cash-flow and keeps your small business a float.

This could be a professional company which specializes in credit control all the way to court action, this service is usually used for bad debt or difficult customers. The service can be quite pricey and you may have problems getting them to deal with only a few invoices per month.

Another option is to use a virtual assistant (VA) in your area and give him/her the list of open invoices or just copies of them and have the virtual assistant follow up on your clients. You can also use online technology to keep your files up-to-date and make the work-flow more efficient for you and your VA, saving time and money.

Important, no matter how you choose to do your credit control, is to set guidelines, it’s no good getting paid and loosing the client at the same time. Keep your virtual credit controller up-to-date with payments received, clients get upset if chased for money they already paid, and it makes you look unprofessional.

Remember, the easiest way to get new business, is to offer more and new products and services to existing clients. ST.

Disclaimer: As with any of my readers questions, I do not have all the answers and here on my blog I can only give you some ideas, since I know very little about your small business. If any of you can add anything here do so for the benefit of my reader, who asked the question and everybody else, leave a comment below – I’d be most grateful.

This interesting question was emailed to me last week, and at first I thought to post a one-liner or just email back and say something like, “higher is always better“. I got thinking about this and decided the answer is not as clean cut as it may seem.

After all we are talking small business and start-up business, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer- or Personal business, like professional, contractors, freelancer, self-employed, sole-trader and virtual assistants here. So I reconsidered and decided to write about it here.

As I said, generally speaking, a higher cash-flow is desirable because you have more “scope” to develop cash-flow reserves for your small business, by using standard cash-flow planning tools, like renegotiating payment terms with your suppliers and deal with credit control better.

Here is the thing, if you are a micro business, or even a one man/woman home business, more or less cash-flow may not be as important to you as concentrating on credit-control. Let me explain, if you are a service business, you may just want to make enough money for your monthly income, there are limits to the amount of work you can do, before you start running into other problem areas, like employment issues, office rent, etc. You may not want that, you may be very happy the way things are – and contra to popular belief that is perfectly OK. However that means you do not necessarily want a higher cash-flow.

The same applies to small manufacturing businesses, higher cash-flow can also mean much higher risk for your small business, your client could go bankrupt and not pay you, what then? This is something that happened to me in the late eighties – it was a very unpleasant experience.

ANSWER: A qualified “HIGHER”, with a big “BUT” for micro-businesses. ST.

Disclaimer: As with any of my readers questions, I do not have all the answers and here on my blog I can only give you some ideas, since I know very little about your small business. If any of you can add anything here do so for the benefit of my reader, who asked the question and everybody else, leave a comment below – I’d be most grateful.

How long is a string? Let me give you some pointers here, but please remember you can always do more on the cost-cutting front in any small business and start-up business, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer- or Personal business, like professional, contractors, freelancer, self-employed, sole-trader and virtual assistants.

1. Keep your staffing level low. As much as it may hurt, work longer hours yourself, until extra staff is economically viable.
2. Outsource all non-core business activities. This will reduce your fix-cost structure, make your small business more flexible and you can react faster to an economic down-turn.
3. Buy second hand. Do you really need the brand new van? Or computer, or……
4. Work from home, this will not only cut your cost, but may improve your work-life balance at the same time.
5. Let your staff work from home. No office cost, hire a room if you need to on an hourly basis.
6. Use online technology, so you don’t waste time and get distracted.
7. Focus on your core business and sales. Every distraction costs time and money, sales generates money.
8. Bootstrapping. Think before you spend a penny, could I borrow, hire or do it online, get creative.
9. Analyze your fixed cost every month. You will find things you don’t need – trust me you will.
10. Compare and get new quotes. Even if you need the service or product from your supplier, check others all the time, insurance, telephone, utilities, etc.
11. Get better payment terms. Ask to pay in 60 or 90 days, or get an early payment discount.
12. Check your bank charges – you’ll be surprised. Or have it done on a results basis, doesn’t cost you time and gets you money back.
13. Do credit control – get your money in lower your bank overdraft cost and charges.

This is only a short list of what you can do, but it’s a start. Remember even $100/£50 per month is $1200/£600 a year more in your pocket. ST.

Disclaimer: As with any of my readers questions, I do not have all the answers and here on my blog I can only give you some ideas, since I know very little about your small business. If any of you can add anything here do so for the benefit of my reader, who asked the question and everybody else, leave a comment below – I’d be most grateful.

I don’t know the exact circumstances of your self-employed business, but here are a couple of points you can think about.

I’m assuming these bank charges derive from an bank overdraft or bank loan.

So, if your loan is say $5.000 and your monthly payments to suppliers $10.000, then you may be able to re-negociate your payment terms with some of your suppliers. If for example you could get $6.000 worth of suppliers to agree to a 60 day payment term then you could repay your loan and would not have to pay these charges. These suppliers need to be “monthly” suppliers, otherwise this will not work.

The best thing for you to do is go to your accountant, bookkeeper and get them to do some Reality Cash-Flow Gaming with you. All the tools you need for this are available free of charge in our OnlineOffice.

Once you start planning your cash-flow you will understand your business much better, and you will see that there are other ways to create cash-flow too, outsourcing and credit control for instance. This will allow you to get rid of your bank charges. Comparing bank charges can reduce the impact on your business, not each bank is the same.

I love bootstrapping techniques for running small businesses, so you could read about that too, with a little creativity and realism you can do a lot without money.

Last but not least, not borrowing is the best strategy, too many people scream for Venture Capital, bank loans, government funding, if you need anything like that to survive, don’t do it! Get creative! ST.

Disclaimer: As with any of my readers questions, I do not have all the answers and this is not business advice, since I only know very little about your business. If any of you can add anything here do so for the benefit of my reader, who asked the question and everybody else, leave a comment below – I thank you for your effort.

I had the above question emailed to me over the week-end. I have written about this before here:

• Small Business Checklist: Getting Payed
• Small Business Failure – Reason: Cash-Flow

Credit control deals with getting your money in, and is most important for small business survival. You need to pay attention to your credit control all the time, if you can’t do that get someone else to do it for you, outsource it to a virtual assistant, for example.

Hope this helps, otherwise get back to me. ST.

Disclaimer: As with any of my readers questions, I do not have all the answers and this is not business advice, since I only know very little about your business. If any of you can add anything here do so for the benefit of my reader, who asked the question and everybody else, leave a comment below – thank you.

I have discussed before that it is important for small business and start-up business, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer- or Personal business, like professional, contractors, freelancer, self-employed, sole-trader and virtual assistants, to do a minimum of business planning, but does it stop there?

Not really, you need to keep up to date with your bookkeeping, to complete the business planning process. You may ask why, if you have done the planning, why not get your bookkeeping done once a year for your tax return?

The answer to this question is the business planning process never ends. Remember I have been talking about going back to your plan at least once a month. In order to fine-tune your small business planning you need to actual information how your business performed in the last month. The only way to do that is to do your bookkeeping or accounting.

By doing that you will be able to compare your predicted numbers in your cash-flow with the actual number your business has generated. This in turn will help you to update or modify your cash-flow plan for the future. More important than that, you will learn new things about your business:

• You may have higher (good) or lower (bad) sales, than you expected?
• Your cost in your business may be higher (bad) or lower (better) than you expected?
• Your cash-flow may be better or worse do to the above two points?
• You may need to outsource some business processes to lower your fixed cost structure, to make your business more recession proof or just more profitable?
• You may need to ramp up your sales and marketing activities for your small business products or services?
• You may also have to adjust your SWOT analysis and your business goals?

You will be surprised how creative you can be, once you know about and understand a problem in your business plan. It may not even be a problem at that time, you may just need to adjust the way you do things, and you may have avoided a small or big problem in the future.

In my opinion strict cost control and bootstrapping are not like nice to have features, they are essential for your small business survival. Often the difference between failure and success is just a little planning and checking the “plan” – doing a reality check. There is no excuse not to do it, all the tools are available for free, for anyone.

If you feel the initial process of business planning is too much for you, than get your accountant or bookkeeper to help you to set your cash-flow fore-casting, SWOT analysis with you, doing it online will give you strategic advantages, like you can work with your accountant or bookkeeper in real time in different places, this lowers your cost, no time wasted and is good for the environment.

I would like to make one more point here, the aim of all this planning is not to get it spot on – no, the aim is to understand what is happening in your business, that is why you should be doing it.

Among other things, it will give you a measure of certainty, security and confidence, if you understand what is happening in your business. So, how confident are you about the future of your business? Why not take the weekend and have a planning session, it is like playing monopoly, only this game will secure your future. ST.