customers

Get a grip on your cash flow

24/10/2011 By Mushroom Internet

Predict and plan: work out in detail when you can expect cash to come in and plan how you will spend it. It will help you to see where you can generate extra cash to fund new projects if you are growing, or even pay off old creditors if you are stressed.

While this applies whatever the size of business, it is particularly critical if you are a micro businesses or a small businesses with significant order-to-ship lead times, buying materials and selling products on credit terms, when you will have a significant working capital – cash – requirement to fund the work in process.

On this article we’ll show you how to put together a cash flow management workbook that will help you to manage your cash, month by month.

Start with your order book and prospect list

Starting with cash coming in, you’ll know your order book, but what about beyond that?

This is the hard bit – study your prospect list and write down when you can expect to get new orders from those clients. For this you have to really understand your clients’ intentions and buying behaviour.

Then, for your current order book and your prospect list you document your cash inflow:

order dates;
shipment dates; and
client payment dates and amounts.

Suppliers and inventory

Do the same with the supplies, or the stock replenishment you will need to complete those orders – one of the major parts of your cash outflow:

supplier order dates;
goods in dates; and
supplier payment dates and amounts

VAT

At this stage you can then predict the two main elements of your VAT liability. This is particularly important if your are on the accrual system when your VAT is pinned to invoice dates rather than cash payments and receipts.

From your order book and your purchasing plan you have the tools to start to calculate the VAT reserve you will need at the end of each VAT quarter.

Staff costs

You should be able to predict these and add them to your spreadsheet, including PAYE and employer’s NI liability.

Overheads

These, you can obtain from your management accounts. If you don’t have monthly management accounts – and you should – you can use your bank and credit card statements, and your cash book.

The simplest way is to include monthly averages, making allowances for any known increases and decreases. You can then account for any VAT recoverable on overhead supplies.

Cash flow management workbook

So there we have it – your cash flow management workbook. From it you’ll be able to see:

what funds your have to pay off overdue creditors if your business is stressed;
what funds your have to fuel your growth;
which areas to tackle to improve your cash flow – for example see our article on creditors; and
what extra funds you will need to bring in to accelerate your growth.

Essential tools for well managed businesses!

Posted by Peter Johnson, Business Advisor with SGBA. If you would to talk to someone about your business, please call Peter on 07714 093406 or send him an email to peter.johnson@sgba.co.uk.

What do you do when a customer makes a complaint?

21/09/2011 By Mushroom Internet

What will you do if your product or service fails to meet your client’s expectations and they make a complaint?

You certainly don’t put it in your desk drawer and hope it will go away – that’s a sure way to trash your reputation.

And don’t hide behind your Terms and Conditions. We’ve all experienced being given the brush off when we thought we had a legitimate complaint – it makes you think twice about using the same company again.

Actually, you get back to them promptly and talk to them about the issue: you promise to try to resolve it within a given time-frame, and try to keep that promise.

Your client might still be unhappy with what you supplied, but they’ll be happier with you and your company as they will know you have responded to their complaint and their issue is being addressed.

Put in a Complaints Handling System

And you should do this systematically for every complaint.

Faced with this, recently, a client asked me what was meant by a Complaints Handling System that conformed to the guidelines in ISO 10002 – the client was required to do this for their accreditation.

Now, these International Standards don’t normally tell you how to do it, but amazingly there is a really good explanation in that Standard* of a complaints handling process for a small business – essentially this:

Devise a system to log, track and resolve complaints;
Set target time-scales for contacting the client and for resolving their issues;
Tell the client what these time-scales are, and talk to them regularly about your progress;
Appoint someone to administer the system – making sure these commitments are met;
Decide which staff will be involved in dealing directly with your clients, and get them some training if necessary – they may have to deal with frustration, anger or confrontation over the phone;
Take it really seriously – carry out regular audits at director level to ensure things are being done on time;
Use your audits to drive continual improvement; and
Carry your staff with you and reward them for their performance in a difficult role.

This sounds like a lot of work

Not really. If you have a culture of client satisfaction and continual improvement, you are probably carrying out most of these steps anyway.

And remember, most growing, high-performing businesses are process-led, so if you want to be like that I guess you’ll have to start putting some processes in.

Posted by Peter Johnson, Business Advisor with SGBA. If you would to talk to someone about your business, including your complaints handling system, call Peter on 07714 093406 or email him at peter.johnson@sgba.co.uk.

*ISO 100002:2004(E) Appendix A.

Four steps to make sure your clients pay on time

25/08/2011 By Mushroom Internet

We all understand that not collecting payments on time has as a severe impact on your cash flow, but let’s not forget also that you are effectively giving your clients, your debtors, interest-free credit, and this also has an impact on your cash flow and your profit.

Whatever the size of your business – start-up, sole trader, micro business, small business or SME – the remedies are the same. Follow these four steps and you will reduce the amount of money owed to you:

send out the invoice as soon as you ship the goods;
call the client the day after you send out the invoice to check the invoice has been received and there are no issues with the goods or services supplied;
call the client 5 days later to carry out the same checks, so that there no excuses on that front; and
call the client 5 days before you expect to get paid to make sure your invoice has gone into that month’s payment run.

Pretty obvious really, but it is surprising how many companies are not doing that.

DSO – Days Sales Outstanding

Also known as debtor days, this is the average number of days your clients take to pay their invoices.

Let’s take a business that has a turnover of £1,000 per day, typical of many small businesses with a couple of employees. If its clients owe them £75,000 then their DSO is 75 days – 75 days at £1,000 per day – that is what it means.

So the DSO for your business is just the total debt owed to you divided by your average daily sales.

What does DSO tell us?

Well, the £1,000 a day turnover company traded on 30 days terms so it could reasonably expect to get paid in 45 days – the end of the month following the month of the invoice – and it should have debtors of £45,000.

Just imagine the impact on cash flow of reducing the DSO to 45 days – a £30,000 improvement. Even a 10 day reduction in DSO would improve cash flow by £10,000 – certainly worth going for.

Effect on overdraft

One factor that is often ignored is that companies may find they have to borrow to fund the excess credit they give to their customers. Our sample company could have an overdraft of £30,000 – essentially funding the gap between 45 days and 75 days DSO.

The cost to them of funding that gap at an interest rate of 12% would be an additional £3,600 in bank interest, not counting the bank charges that go with it. That is an extra £3,600 cost to their business for giving their clients excess credit on interest-free terms – reducing net profit – madness really.

You could save the cost of bank interest and increase your profit by improving your DSO and reducing your borrowing.

Invoice on time

Strictly speaking DSO does not include your delay in sending out your invoices, but the impact is the same and the easiest way to eliminate that is to send the invoice out as soon as you have shipped the goods or supplied the service.

Manage your clients’ payment expectations

Talking to Graham Sands, a credit control specialist with Amril Ltd, he advises contacting the client at least three times between invoicing and collecting the money:

the day after you send out the invoice to check the invoice has been received and there are no issues with the goods or services supplied;
5 days later to carry out the same checks, so that there no excuses on that front; and
5 days before you expect to get paid to make sure your invoice has gone into that month’s payment run

That way your customers will get to know when you expect to get paid.

They will often delay paying their suppliers where they can get away with it to improve their own cash flow, but if you chase them – nicely – they will get to know you expect to be paid on time and they should begin to act accordingly.

We can help

Even if you follow these steps – invoice on time and contact your clients regularly to ensure payment on time – you may still be left with number of significant debts that are proving difficult to collect. We can help you collect the overdue payments and ensure such debts are less likely to occur in the future.

Posted by Peter Johnson, Business Advisor with SGBA. If you would like a free initial consultation to discuss your business, call Peter on 07714 093406 or email him at peter.johnson@sgba.co.uk.

We would like to thank Graham Sands of Amril Ltd for his significant contribution to this article.

Collecting cancellation fees

24/08/2011 By Mushroom Internet

People don’t like paying cancellation fees even if they are aware of them when they book their appointment, to the extent that charging a fee often results in the client going elsewhere.

No easy remedies

Apart from asking for a non-refundable deposit, there are no easy remedies.

Charging a cancellation fee to their credit card leaves you open to the client disputing the charge and claiming a refund, the excuse being: they did not receive your service, they were not aware of your cancellation policy (even if you did tell them), and they did not authorize the charge.

Avoid cancellations in the first place

So, by far the best way of reducing lost revenue is to avoid the cancellations in the first place.

Send the client a reminder 24 hours before the appointment either by SMS, email or phone and get a confirmation of the appointment;
Ensure your staff are well trained to handle objections and secure the appointment;
Survey the clients to find out why they cancel and address the issues; and
If a client repeatedly cancels insist on payment up-front. If they don’t like that then don’t make the booking. Let them become the competition’s problem!

Finally, if you can afford it, you could offer a discount for up-front payment. At least then you would have the cash even if your profit is reduced.

Posted by Peter Johnson, Business Advisor with SGBA. If you would like a free initial consultation to discuss your business, call Peter on 07714 093406 or email him at peter.johnson@sgba.co.uk.

We’d like to thank Arnold Toynbee of SolutionWise, Australia, www.solutionwise.com.au for permission to publish this material.

See our latest presentation

23/08/2011 By Mushroom Internet

Customers and cash. How to get more of both!

In difficult times most SMEs need to get more of one and conserve the other. In fact many would like to get more of both. Our latest presentation gives ideas and tips on how to do both.

Feel free to comment on the presentation and we look forward to receiving your feedback.

>Intern Placement

17/02/2010 By

>“Job openings for new graduates are massively oversubscribed leading to intense competition, says a new report”

A common headline for graduates leaving universities and for many a more creative approach is needed to find employment. This was the situation a local Sussex graduate found herself in the summer of 2009 but, undaunted, she identified the kind of job she wanted and focused on positioning herself above the competition.

Roz Worcester, from Highleigh in West Sussex, graduated in 2009 with a degree in History and Politics. Keen to pursue a career in Marketing she joined Southern Group Business Advisors (www.sgba.co.uk) as an intern. This was an unpaid role but enabled Roz to gain experience in a number of key areas – organise and plan events and seminars; research and presentation on social marketing tools; client satisfaction surveys; e-book compilation; administration of meetings – to name but a few. This also led to paid work from some of their clients.

The SGBA is a consortium of 9 experienced business advisors who have held senior positions in a variety of organizations, both large and small. Their areas of expertise include strategy, sales and marketing, financial control and planning, and general business management. They work with the owners and managers of SME’s in Surrey, Sussex, Kent, Hampshire and Dorset who want to develop and grow their business.

As well as the valuable and varied work experience, Roz was able to benefit from the large network of contacts built up by the advisors. An introduction was made to a major market research company and Roz’s CV was put forward for the graduate recruitment process. After interviews and assessment days Roz was accepted onto the graduate training programme!
Feedback from her new employer identified her practical experience with the SGBA, and in particular the direct contact with their customers, enabled her to ‘stand out’ from the rest.

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Customers and cash. How to get more of both!