Here we go again. Cases are rising, the threat of lockdowns is getting ever closer and sadly more people are losing the fight against coronavirus. The Omicron variant is growing at such a rate it is difficult to not be alarmed or concerned about the impact on businesses and our lives in the New Year.
As businesses are battling through staff absence, uncertainty and rising costs, it is now more important than ever to preserve that cashflow. Here are a couple of tips:
1. You do not earn VAT, you collect it – Last week I had a conversation with a business owner who was bemoaning the VAT bill they are facing. They’d spent it all.
There are different VAT schemes that you may wish to explore with your accountant but regardless of which scheme you are on, whenever you receive an invoice with the VAT added, place 30% of that invoice value into a separate account and leave it. Ignore the gross sum that you’ve been paid. Park it in an account that puts it out of sight and mind. Use this account as your VAT and Tax account. Top it up with each invoice and you’ll likely find that you’ve got a surplus at the end of the year. Depending on your cashflow, you may wish to top it up. You may also find a surplus at the end of the year (after tax and VAT) so use that for your annual accounting or bonuses etc.
2. It’s not what you earn, it’s what you spend – when was the last time you reviewed your P&L? Not a general overview, but a proper look, line by line? Are those flash new apps and software packages really that useful? When was the last time you renegotiated a contract or compared your insurance provision with another provider? What about your phone, IT, company cars, suppliers etc?
It may be thousands a year, it may be ten pounds a month, whatever you’re spending your hard earned income on, do you really need to buy or subscribe to that product or service? What is the benefit of this expenditure and could you manage without it? It doesn’t have to be forever, you can pick these services up again when you need to. You may want to put a limit on that corporate credit card and perhaps resist that offer to spread payments. Before you click, have a think.
3. Get that debter list down – Stop giving your customers or clients free credit. Speaking with another business owner recently I asked them how they keep on top of their near 500 customers when it comes to paying invoices. Their answer was to say they didn’t. They haven’t got a clue who as has paid and who hasn’t. They are simply trusting that their customers will pay them eventually. This is madness. You don’t need to be aggressive or impolite, but you do need to ensure you are being robust in being able ensure you are paid for the services or products that you are providing. You’ve got to find a away of logging and tracking your orders and invoices and a means by which to tick off those who have settled what and when. Apart from being organised and effective when it comes to reporting accounts, it gives you a clear set of data that allows you to take whatever action is required to get it recovered.
Some people have a real problem about asking for money or even talking about it. You shouldn’t. It’s your income and livelihood and ignoring debters for fear of confrontation or feeling intrusive needs to be overcome. Set yourself some time for you and/or your accounts/ finance department to tackle the list of those outstanding invoices. Most people are only too happy to settle an outstanding debt, and many have legitimate reasons for not paying on time. Try different mediums, phone, emails, letters, some may even choose to turn up at the debters place of work of home, whatever you decide, be assertive but fair and aim to recover the monies owned and retaining the customer or client (if you wish to).
4. Ask for help - This could be asking for help from groups or your local authority. It could be using temporary agency to get staff in to deliver and project or job that you don’t have the skills or expertise to deliver with your existing team. Maybe it’s nothing more than having a chat with a local business, owner, accountant or third party to get some assistance with overcoming a particular problem. Most people are more than happy to provide an opinion or impart their wisdom when requested. Fortunately whether it’s a mental, physical or logistical problem that needs to be overcome, help is out there.
There are a number of different remedies for problems or challenges and despite you feeling as though you in it alone, you most certainly are not. Businesses up and down the country face the very same challenges you do and have ways and means of overcoming them without forking out vast sums of money or committing to any contracts. Sometimes a phone call or quick email can solve the issue you are facing – it’s having the inclination and clear head to think whom it is you should be contacting. Think about your contacts list, who has been there and done it and who could pass you on to the right person if they don’t know themselves? If you’re not sure who to call, get in touch with us and if we can’t help, we most certainly will know somebody who can.