Tips To Cashflow Success

Cashflow funding of a business is key for its survival. A number of businesses fail within their first two years of trading, not because they didn’t have a good product or service, not because they didn’t have a market. They simply ran out of cash.

Sales Income

Prepare a detailed cashflow of your normal business trading, information from Sales already in your diary, if you have been trading for a few years. Use past history to project forward. For the new business set an achievable goal. Always look ahead a minimum of a year, three years if possible.

You may have peaks and troughs, downtime or seasonality, build these into your forecast.

Don’t forget VAT if that applies. Ideally shown it separately, and offset the VAT on purchases. Your sudden inflow of cash may belong to the Inland Revenue.

Your Costs

Main costs first

Materials
Wages
Rent
Travel etc.

At the bottom, how much do you have in the bank to start off with. Show the opening balance of the bank.

We always look at forecast cashflows, ie a budgeted one along with an actual one. As the months pass by update the cashflow with your actual figures and roll forward. So that you are always looking at a year to date. It does not necessarily need to be in line with your year end. Do a separate one for the year end if necessary.

By now you will know ahead of time your cashflow issues, peaks and troughs, you can now put a plan of action to make sure that you are covered in the troughs, and are saving in the peaks.

If you need a large amount of cash in six months time. Don’t leave the sudden influx of cash to the last minute. Build up over a period of time.

You might be wanting to buy capital expenditure, or take on more staff, it will help you predict when this can take place.

Look at your marketing to increase sales. Check your margins to make sure your sales cover your costs. Keep a close eye on the costs themselves.

Look at other options for finance other than your cashflows from the business.

Gain credit from your suppliers
Finance leases from the banks and other money lenders
A mortgage

Your credit score can even affect you being able to take on a large contract. You will still need the credit from your supplier to make that important sale.

By gaining credit it will increase your credit score and make you more attractive to lenders.

Nicola Cross
26/9/11

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.

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Rates and Threshold 2021/2022

All the important rates and threshold for the tax year 2021/2022

 

National Minimum Wage


This takes effect from 01 April 2021 and all workers are entitled to.

 

Category of worker

Hourly rate

Aged 23 and above

£8.91

Aged 21 to 22

£8.36

Aged 18 to 20

£6.56

Under 18 (but above compulsory school leaving age)

£4.62

Apprentices aged under 19

£4.30

Apprentices aged 19 and over (but in the first year of their apprenticeship)

£4.30

 

Please note the age rate bracket has changed from previous years also.

 

PAYE Tax Rates and Threshold


These rates depend on the amount of income you earn.

 

Personal allowance

£12,570

Basic tax rate – 20%

£12,571 – £37,700

Higher tax rate – 40%

£37,701 - £150,000

Additional tax rate – 45%

£150,000+


Employment Allowance

 

Employment Allowance allows eligible employers to reduce their annual National Insurance liability by up to the annual allowance amount.

 

Employment Allowance

£4,000

 

Statutory Sick Pay (SSP)

 

The same weekly SSP rate applies to all employees. However, the amount you must actually pay an employee for each day they’re off work due to illness (the daily rate) depends on the number of ‘qualifying days’ they work each week.

 

Number of qualifying days in week

1 day to pay

2 days to pay

3 days to pay

4 days to pay

5 days to pay

6 days to pay

7 days to pay

1

£96.35

 

 

 

 

 

 

2

£48.18

96.35

 

 

 

 

 

3

£32.12

£64.24

£96.35

 

 

 

 

4

£24.09

£48.18

£72.27

£96.35

 

 

 

5

£19.27

£38.54

£57.81

£77.08

£96.35

 

 

6

£16.06

£32.12

£48.18

£64.24

£80.30

£96.35

 

7

£13.77

£27.53

£41.30

£55.06

£68.83

£82.59

£96.35

 

Dividend Allowance


You also get a dividend allowance each year. You only pay tax on any dividend income above the dividend allowance.

 

Dividend Allowance

£2,000


Mileage Allowance


The allowed deductible rate per mile for business use.

 

Type of vehicle

Rate

Car

45p (for the first 10,000 business miles, then 25p for each subsequent mile)

Motorcycle

24p

Cycle

20p

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Business Tips from an Accountants point of view

We’re halfway through the year and 2019 is not slowing down for anybody. There are approximately 5.7 million businesses in the UK, of which 96% are considered small or micro. So, we small businesses are crucial to the UK economy, there is no denying this.

 

Whether you are a start-up and excited for the times ahead, or an establishment renewing your challenges, we all want to be successful with our business. In our latest blog, we talk about tips we think are vital to any business.

 

We all have a vision in mind, of where we’d like to see our business in the future. This vision needs to be translated on paper as your business plan. A business plan is a must for all business owners. This can help outside investors get an insight of your business, for if ever you need funding to grow your business.

 

Business Plan


A business plan should consist of;

·    Summary – What is your purpose, what is your vision?

·    Target market – Who are you likely to sell to

·    Competitors – What is your rivals weakness? Why are you different?

·    Staff – Do you need people to help run your business. What level of skill and pay is required?

·    Suppliers – Who will be your main supplier?

·    Marketing Plan – How will you advertise yourself to the world

·    Operations – Which is the best way to run your business.

·    Finance – How much money do you need? Determine the profitability of the business.

 

Business Structure

As well as a business plan, you will need to have a business structure. Sole trader, partnerships and limited companies all have their own pros and cons. Deciding which structure to choose is not always straightforward. If an asset is owned outright, then you would need to consider retaining personal ownership on incorporation. If you’re not sure which structure model you should go for, then here at Cross Accounting we can give tailored advice to you.

 

Year End

We cannot stress enough the importance of doing your year end as early as possible. Once completed, this will give you peace of mind as you will not have to worry, until next year. It will also give you more time to budget for your tax bill. You will not be in a rush to find the money for the tax bill and not kill your cashflow. Keep all receipts for your expenses, these will all help lower the tax bill. If you buy equipment or tools, mobile phone bills, petrol, these are all deductible. HMRC can conduct random spot checks, so it’s important to keep paperwork, recommended for 6 years.

 

Budgeting

Having budgets in place for your business can help you predict the near future. This allows you to have a spending plan, so you can make sure you have money for the things you need and the things that are important to you. You can see what is eating up your cash and avoid spending on unnecessary fees. Below is an example of a very simple budget.

 

 

Month 1 (Budget)

Month 1 (Actual)

Variance

Month 2 (Budget)

Month 2 (Actual)

Variance

Month 3 (Budget)

Month 3 (Actual)

Variance

Starting Cash

10,000

10,000

0

11,630

11,600

-30

 

 

 

Income

2,500

2,500

0

 

 

 

 

 

 

Total Income

2,600

2,600

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rent

800

800

0

 

 

 

 

 

 

Mobile

50

55

5

 

 

 

 

 

 

Travel

20

50

30

 

 

 

 

 

 

Gas and Electricity

100

95

-5

 

 

 

 

 

 

Total Expense

970

1,000

30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income - Expense

1630

1,600

-30

 

 

 

 

 

 

 

These tips will keep you motivated and more importantly give you an idea of where your finances lay, helping you to quickly identify if there are rainy days ahead.

If you need expert tailored advice, please do get in touch as we are always happy to help.

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