To maintain a healthy cash flow, you need more than just strong revenue. Improve your small business cash flow by implementing Five Simple Cashflow Rules.
Need a hand managing cash flow? You’re not alone. The key is getting your invoicing right, by invoicing customers as soon as possible and using tools like Xero’s invoice reminders to move payments along.
That said, there are a few other simple rules you can apply to manage your cash flow and get your invoices paid even faster:
Keep your books accurate and up to date – so you can see your financial state at a glance.
Don’t be too lenient with your customers – you can be direct and still polite. Keep a close watch on your accounts receivable turnover at all times and act sooner rather than later.
Keep your accounting simple – so you have a good handle on these business metrics. We can help with this.
Keep your business and your professional finances separate – this is essential to understanding your true cash flow position. Mixing your business and personal finances can leave you uncertain about business performance.
Build a cash reserve – so you are prepared for unexpected events and can take advantage of opportunities when they pop up.
First you want to get your invoicing right. Get into a habit of sending invoices quickly. Then follow the steps above to collect revenue and keep your finances organised.
Get in touch for guidance on your invoicing and business cash flow.
Your profit and loss statement (P&L) helps you understand your business performance and profitability over time. It’s sometimes called an Income statement and its main purpose is to list income and expenditure.
Whereas a balance sheet is a snapshot in time, the P&L shows transactions over a specific period of time. This can be a month, quarter, financial year or any other period, and it can be a stand-alone report or a comparative period report.
Together with the balance sheet, these two reports provide a comprehensive understanding of the financial position and performance of a business.
The profit and loss statement has two main sections: income and expenses
These may be further subdivided depending on the complexity of the business and reporting requirements.
Income or Revenue
Income primarily includes main business activities such as sale of goods or services. Other income such as interest received, capital gains or income from secondary business activities is also reported.
Expenses
Expenses are usually divided into two sections: direct costs, or cost of goods sold, and expenses. Cost of goods are those that are directly linked to the provision of services or sale of goods. For example, if you buy widgets from a wholesaler and sell them at a marked-up value, the cost of the widgets is a direct cost, not an overhead expense.
Other types of direct costs might be importing and freight costs, contractor costs or certain equipment. Some direct costs are fixed, that is, they are the same from month to month, or they could be a fixed percentage of sales; others vary in value but are still related to the income producing activities.
Overhead expenses are all the other expenses required to run the business, regardless of the level of income: for example, rent, utilities, bank fees, bookkeeping fees, professional development costs, vehicle costs and staff costs. Many of these costs form the basis of working out your break-even point, or how much it costs just to open the doors for business.
There are some expenses which may be reported as a direct cost in one business but an indirect cost in another type of business, for example, merchant fees or contractor costs.
The Bottom Line
Total income minus total expenses results in the net profit (or loss), is often called ‘the bottom line’. Often business owners are just interested in looking at the bottom line, but a true financial picture requires an understanding of several reports and an ability to see the big picture that the reports are illustrating.
The P&L is a vital tool to analyse for trends over time
What does your P&L tell you about relationships and ratios between sales and expenses, seasonal changes and annual trends?
Have all your direct costs been allocated correctly?
Have you recouped all billable expenses from customers?
Financial statements help you understand the big picture for your business. With deeper understanding of your business operations and performance you can make informed decisions about your business finances.
Book a session today to examine your financial reports with our experienced business advisors.
You started your business to have the freedom of being in charge. But are you actually working harder than ever and drowning in admin, meetings and other demands on your time?
Don’t worry, there are ways to get your work/life balance back under control.
In this series, we’ll look at the core ways your business can be structured to deliver on your own personal, family, philanthropic and leisure goals.
A business that’s designed to balance work and downtime
Running a company can be all-consuming. You have a business idea you believe in and a team that’s working hard to bring your product or service to market. It’s easy to let the multiple tasks on your to-do list take over, so you end up working around the clock, with no downtime.
But, ultimately, working this hard is counter-productive. You burn out, have no energy to lead and start to make silly mistakes. So, dialling down the workload is a must.
Here are four key ways to get your work/life balance back on track:
Prioritise tasks and block out time
Schedule specific blocks of time for work tasks, personal appointments and downtime to relax and decompress. Be ruthless about prioritising tasks and focus on the 20% that yields 80% of the results. This prevents work from bleeding through into your leisure and family time.
Learn to delegate and outsource
Don’t try to do everything yourself. Find the tasks that can be delegated to team members or outsourced to freelancers and other contractors. If data entry is your nemesis, hire a bookkeeper. This frees up your time for higher-value activities and reduces your workload.
Establish boundaries between work and leisure time
Set clear boundaries between your work and personal life. This might mean turning off work-related notifications after a certain time, or designating specific days or times for family and friends. If you work from home, think about having a home office that you can only use during these agreed working hours – so you create a separation between work and downtime.
Schedule regular breaks and downtime
Burnout is a real risk for entrepreneurs. Be sure to take regular breaks throughout the day, even short ones, to recharge. Schedule proper downtime – evenings, weekends and holidays – and stick to it as much as possible. This gives you time to breathe and keeps you fresh. Helping you set and track your personal goals
No company has ever prospered with a tired, burnt-out and frazzled CEO at the helm. If your business is taking over your time, now’s the time to take a new approach to your workload.
Come and have a chat about working smarter, not harder.
As your accountant, we won’t just look after the financial side of your business, we can also advise you on the strategic side of your company, including the importance of business development as vital part of your growth plan.
Business development (BD) is what helps your company move from slow, organic growth to fast-paced, hypergrowth. And it’s only by putting the right drive and expertise behind your BD that you can turn your strategic ideas into real success stories.
So, how can we help you achieve this?
Talk to you about your strategic goals
The starting point for any kind of BD activity is to pin down your goals and aims as a business. When you know what you want to achieve over the coming months, it’s far easier to define a strategy for success. And that’s easier to do when you talk to an objective adviser, like us.
We can sit in on your board meetings, talk to your executive team and get a real handle on what makes the business tick. And, armed with this knowledge, we’ll work with you to drive the direction of your BD and find the best opportunities for you to focus on.
Help you create a clear BD strategy and plan
Having a defined set of BD goals is a good starting point. But to put this all into action in a productive way, you’re going to need a comprehensive plan for your BD projects.
Our years of experience advising business leaders and their teams really comes into play here. We know the best routes to take, the budgets that will be needed and the right tactics for bringing in more contracts, sales and partnerships. By putting these strategies into a clear plan, and linking this to agreed timescales, you have a BD route map to follow and action.
Introduce you to a broader network of business partners
We work with a wide range of businesses across many different sectors, industries and niches. By introducing you to our network of clients, we welcome you into a supportive community of like-minded business owners. And that’s excellent news when looking for new partnerships.
Whether it’s attending a local conference, an online webinar or one of our in-house client events, you’re going to meet new people, share new ideas and make the right connections. This is a great way to build alliances and work together with other local businesses. And when you’re well-connected, you set the very best foundations for your future BD activity.
Provide better routes to funding and investment
Whatever goals you’ve set for your BD projects, it’s likely that you’re going to need additional funding to finance this activity. Investing in your expansion, or new partnerships, is vital to getting a good return on your BD, so great access to finance is a definite bonus.
We’ll advise you on the most appropriate funding channels and how you can use these facilities to finance your BD plans. And we can also link you up with banks, lenders and business finance specialists – so you get the advice and finance you need to bring your BD to life.
Help you track and measure your BD performance
Meeting your BD targets takes time – and a whole lot of dedication. Measuring your BD performance over time, helps you stay on track and gives you a good indication of how well you’re tracking against your planned progress.
We’ll help you create the reporting and metrics you need, so you have clear data to track your progress over time. You can log your activity in your project management system, or your client relationship management (CRM) software, and keep clear notes on contacts made, relationships built and targets converted etc.
If you want to get more from your BD, please do get in touch. We’ll partner with you to put some real drive, experience and impetus behind your BD strategies.
There are so many apps in the Xero store now that it can be hard keeping up to date with the latest additions. To make your life easier, we’ve got the lowdown on the top dozen apps.
Dext
Automate your bookkeeping with Dext. Capture receipts, track expenses and mileage, and connect to Xero, 11,500+ apps, banks and more.
A2X
A2X automates ecommerce accounting into Xero for Shopify, Amazon, eBay, Etsy and Walmart sellers worldwide.
LeaveCal by Finlert
Manage team availability with your existing apps by connecting LeaveCal to Xero. Approved leave is fed into your calendar, email or Slack.
Stripe
Stripe makes it easy to accept payments from debit cards, credit cards, Apple Pay and Google Pay for online invoices sent from Xero – so you can get paid faster.
Syft from Xero
Analytics is an interactive and collaborative financial reporting tool that delivers everything from simple reports through to integrated forecasts.
Approval Max
Makes it easy for Xero customers to build robust financial controls across accounts payable (AP) and accounts receivable (AR).
Square
Whether online or in-person, get paid quickly and securely with a variety of hardware and software to process credit cards, Apple Pay, and Android Pay, including touch-free options.
ServiceM8
The job management app for trade contractors and service businesses, with everything to help you cut paperwork, complete more jobs and provide amazing customer service.
Tradify
The job management app for tradespeople! Tradify is the best tool for the job. Manage enquiries, quoting, job tracking, staff management, timesheets, invoicing & more!
Workflow Max
The all-in-one job management solution for Xero users. Save time, boost performance, improve profitability and reduce admin headaches.
Shopify
Connect your Shopify store to your Xero account for easy management of your ecommerce business finances.
RosterElf
A simple cloud-based rostering system that takes the stress out of scheduling your employees. It integrates seamlessly with Xero to process timesheets and save you hours.
We’re here to help you build the perfect Xero app stack
Having a custom app stack at the centre of your business can be transformative. With all your tools and solutions connected to Xero, you have a system that’s 100% tailored to your needs.
We’ll help you explore the app store and build your perfect Xero app stack.
