A Basic Introduction to Cashflow Forecasting

"Sales are Vanity 

Profit is Sanity

But Cash is King"

I don't know who first penned this saying, but one thing is for sure they certainly understood business. I am always amazed at the number of businesses who do not do any sort of cash planning or forecasting. This is a serious weakness in their reporting structure, and can have disastrous consequence to the business, as running out of cash causes major problems to a business. 

Running out of profit can be a long and slow death for a business. But running out of Cash can cause your business to fail in days.

So do I need my accountant to do Cashflow Forecasting? 

Absolutely NOT. 

Use them by all means to help you set up the format and templates, getting good input at this stage can make a world of difference to how easy it is to generate and maintain the documents. But once up and running I would strongly recommend that someone on the inside of the business takes responsibility and ownership.

It should be quick & easy to prepare, have simple ways to check for accuracy and data integrity. Depending on the business you may want to prepare them monthly, weekly or even daily. It all depends on the volatility and position of the business.

In its most simple weekly format it would look something like this

A key concept is that you should always look at the "Cashbook" position. This is NOT the actual bank balance of the day, but what that balance would be if all unpresented cheques cleared. That way you look at the worst case, and make sure that you always have the required funds BEFORE issuing a payment.

I've only included the minimum number of categories, and you will almost certainly need to add more, but try to keep it clean and simple to maintain, otherwise you will not keep it up to date.

So why bother? Well in the above example, the business can clearly be seen to be running into problems at the end of the year, even though the business has actually increased its cash position over the forecast period. 

As such the management of this company can take action to avoid this being a 

problem. This could be by raising short term finance to bridge the gap, proactively bringing receipts forward, renegotiating credit terms with suppliers to name but a few options.

So next time your thinking about your business, remember that Cash is King and take the time to decide how you will control this valuable resource.

Capsule CRM

So I finally got around to changing over my clunky desktop CRM to a nice new online offering from Capsule CRM.

http://capsulecrm.com/

So far I have to say that I'm very impressed. 

It was very easy to set up and very intuitive to use. When I did get stuck their is an excellent support page to the website, with lots of articles, and if you still can't find a solution then their is a good community offering plenty of advice.

Capsulecrm appears to have the balance about right for my needs. Not too complicated, and yet still providing a rich suite of features which are helping me to get my business relationships into order. It clearly isn't as feature rich as some of the bigger offerings, but for your average business is likely to have more functionality than you actually need.

A feature that I really like is the way that it links into the contacts twitter or linkedin posts so that when you open up their contact card you get to see their recent activity. This is great if you want to ease yourself into the telephone call or meeting.

Further there appears to be plenty of options in how you integrate this with your workflows, and email system. Something which again I like, as I hate being told that I have to do something in a particular way, as this may not fit in how I like to operate my business. 

With plenty of 3rd party application support, and a smartphone client I'm pretty sure that CapsuleCRM has all the functionality that I'm going to need for a while.

So if your looking to update your CRM software I would definitely recommend that you take a look at Capsule. They even give a free account if you have less than 250 contacts and don't need the integration models. So what have you got to loose other than an hour of set up time.

Business Record Checks

Recently HMRC announced that would be extending its business records checks, after a pilot study revealed that " around 44 per cent of businesses have problems with record keeping, while around 12 per cent have seriously inadequate records"

It is ulitimately HMRC's aim to apply penalties of up to £3,000 for those business who have seriously inadequate records.

So if your one of those businesses who currently throw all your receipts into a box and rely solely on an external accountant, you may want to consider investing in an accounting system to keep you compliant.

There are several good systems available depending on the type of business that you run. For most smaller businesses, taking advantage of a cloud based product would make most sense, as they don't require any specialist hardware or upfront payment, with many even offering a free 30 day trial.

So why not give it a go, as if HMRC come knocking you may just save yourself a small fortune in fines.

Link to HMRC's full Article
http://nds.coi.gov.uk/clientmicrosite/Content/Detail.aspx?ClientId=257&NewsAreaId=2&ReleaseID=421306&SubjectId=36

Accounting in the Cloud

For the last few years the buzz word in computing has been "cloud computing". Everyone has been promising that Software as a Service (SaS) is going to revolutionise the way that we use our IT.

To date, with a few notable exceptions much of this software has promised lots and delivered little.

However in my opinion Freeagent is one of those exceptions, and well worth a look.

Freeagent is designed for small business owners and sole traders who wish to run their business without needing to learn accounting. If you run a Freelance, or contracting business you really should take a look at their software.

Why?

Put simply, it will streamline your accounting process, saving you time and money. It has been thought through from a users point of view, not the accountants. As such it is extremely easy to use and doesn't tie you up in long winded processing. Whether you need to keep track of outstanding quotations, email an invoice to a client, or set automatic payment reminders, FreeAgent has it all covered.

Get a snapshot of all your current estimates, quotes and proposals

A lot of other software can also do this but where FreeAgent excels is in how it handles your bank accounts. Rather than forcing you to meticulously process all of your transactions, you just download your statement into one of the many accepted formats and import into FreeAgent, and FreeAgent handles the rest.

You "explain" the payments and receipts and effectively you've just done your accounts. This radically reduces the number of purchase invoices that you need to process, and is a considerable time saving over the traditional methodology.

Unexplained transactions are just a click away from being processed

Another key feature is the Tax Timeline. This is available on the home page and gives you a helpful reminder of when key tax amounts based on the information entered would be due to HMRC. This is invaluable as it helps you plan for these payments in advance and avoid any nasty surprises.

Keeping on the right side of the tax man has never been easier

FreeAgent integrates with other 3rd party apps, including apps for smart phones, so staying on top of your accounts has never been easier.

In addition to all of this your accountant can log in and review the work that you've done. This means that if you have processed a transaction incorrectly it is easy for them to correct it, without the need to stopping you from transacting.

I have always been a big fan of Sage Line 50, but one of it's major weaknesses was that it was too data hungry for some of the smaller businesses out there. It requires a level of commitment that frankly too many small business owners are not prepared to give. FreeAgent addresses these issues and is rapidly gaining recognition in the accounting and software press.

So if you run a small business, click on the "I love freeagent" link below, and take a look at what FreeAgent can do for your business.

I'm sure like me, you'll be pleasantly surprised.