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Cashflow Management

Let’s talk money!

Have you ever heard it being said “if you can’t manage R1000, you won’t manage R100 000”?

Yup, that’s it! Managing your cash flow is basically tracking how much money is coming into, and out of your business. However, profit does not equal to cashflow. Cash flow is one of the most important components that makes the business successful, like many say…it is the blood that keeps the heart of the kingdom pumping! 

Businesses that have more cash going out more than it comes in completely die or get into debt they could have avoided. 

Back to Basics. 

You should be tracking your cash flow either weekly, monthly or quarterly. There are essentially two kinds of cash flows:

1️⃣Positive cash flow: when money coming into the business through sales for instance, is bigger than the money leaving business by means of salaries, expenses, etc.

2️⃣Negative cash flow: when money leaving the business account is greater than the money coming in. This screams TROUBLE for the business. 

Understanding cashflow 

Simple example: company x renders your services in May, and you invoice them on the 31st of May. Company x only monetise the invoice in around June-July, whilst you had salaries to pay. Thus cash outflow exceeded cash inflow in May. If many other customers continue to do this, you can almost see how your company could run into cash flow issues.

The cash flow statement basically records all of the organization’s cash inflows and outflows, and includes cash from operating activities. The cash flow statement is divided into three parts: investing, financing, and operating activities. Failure to manage this cash can lead to problems. 

We have mentioned the poor cash management may lead to cashflow problems or bankruptcy, but here are some of the causes:

1️⃣Poor understanding of the cash flow cycle – not having a clear understanding/ timing of cash inflows and outflows from the business. E.g. when to pay for accounts payable (what you owe to suppliers),etc.

2️⃣ Lack of understanding of profit versus cash – a business can be generating profits on its income statement and be burning cash on the cash flow statement.

3️⃣ Lack of cash management skills – it is important to acquire the necessary skills to manage your finance. If you are looking for this service, do get in touch with us! 

As they would say, successful financial management involves balancing 3️⃣ elements:

accounts receivable (what you are owed by the customer), accounts payable (what you owe to suppliers), and shortfalls (the amount of money you owe that exceeds your available funds). Make sure  one element doesn’t overtake the others. 

If you can’t afford to pay someone to do this for you, you can do it by yourself. Here are 7️⃣ tips to manage cashflow:

1️⃣Have an emergency fund 

2️⃣Encourage early payment from clients 

3️⃣Put cashflow over profit 

4️⃣Assign someone to monitor your cashflow 

5️⃣Drive and/ or boost sales 

6️⃣Reduce expenses where possible 

7️⃣Finance purchase orders 

An example..

Plan to Succeed: finance

Have you heard the saying, “if you fail to plan, you are planning to fail“? COVID19 is here to prove to us that it’s no cliche! Many are becoming more aware of their financial wellness, and cautious about planning for the future (unforeseen events). Would R10 000, R20 000 have been enough to keep your bakery business amid the national lockdown? It might sound like that’s not a lot, but in difficult economic times/dry seasons, every cent counts.

The first most important step is to set specific short, medium, and long-term financial goals/targets. These goals can include saving up for property, making sure that you are adequately financially provisioned for unforeseen events, and so much more. This process is called financial planning.

A financial plan is obviously different from your financial statements. Here, you make projections for the coming months/years, forecasting income/profits. Hire a qualified and licenced financial planner who will assist you in assessing every aspect of your business finances to help you design and regularly review your financial plan as your business grows.

At Accase Solutions, we offer Financial administrations services, Management Of Cashflow and Budgeting. To get to the bigger goal, you need to hit the smaller targets. Let’s break it down:

Budgeting is simply balancing your expenses with your income, creating a plan to spend your money. This spending plan allows you to determine in advance whether you will have enough money to do the things you need to do or would like to do. 

Cash flow management is basically tracking how much money is coming into and out of your business. This helps you predict how much money will be available to your business in the future.

financial administrator is responsible for managing the accounts receivables and payables of the organization.

…moving right along…

To help you gets started, here are six steps to create your financial plan:

1️⃣ To start off, think about what you want to accomplish and ask yourself… Do I need to expand? Do I need more equipment? Do I need to hire more staff? Do I need other new resources? Most importantly, how will my plan affect my cash flow?

2️⃣ Create monthly financial projections by recording your anticipated income based on sales forecasts and anticipated expenses for labor, supplies, overhead, etc..

3️⃣ Through the year, compare actual results with your projections to see if you’re on target or need to adjust. Monitoring helps you spot financial problems before they get out of hand.

✳ If you don’t have the expertise, consider hiring an expert to help you put together your financial plan.

Accase Solutions is registered with the IAC, Institute of Accounting and Commerce as a Certified Tax Practitioner since registration of Accase Solutions.

Practicing number: PR0100503.
Get in touch with us, a consultant await your call 📲😊

Do you need business insurance?

We can all agree that the global pandemic [COVID19] caught us off guard, no one would have thought we would experience at this specific time. What other reason do you need to have insurance, emergency funds, savings, etc for your business?

In this blog, we will share WHY your business needs insurance and WHAT type of insurance do you need. As a business owner, you may be asking yourself, “Is business insurance really necessary?

According to Discovery Insure CEO Anton Ossip, businesses generally need cover for:

  1. Business assets, tangible or intangible.
  2. Theft (including theft by employees).
  3. Loss of profits or revenues.
  4. Legal liabilities, including liabilities arising from social media interactions.
  5. Losses to the business and liability to third parties following a cyber-attack on business computers (which we covered on our previous blog)

There is a variety of business insurance coverages available to business owners to choose from, you can tailor your insurance protection to address the specific risks facing your business. Some of the aspects of your operation that need protection include (but not limited to): 

  • The type of work you do
  • Your physical premises
  • Property and equipment
  • Intellectual property
  • Employees and customers

Bear in mind though, businesses in different industries need different business insurance coverages to help meet their unique needs.

What insurance does a small business need?

If there’s one policy you’re legally required to have as a small business, is employers’ liability insurance (EL).

EL covers your business in the event that one of your employees claims they’ve suffered an illness or injury as a result of working for you. It covers any legal and compensation costs involved in defending the case. If you don’t have EL, your business can be liable to pay a fine.

Does your tech need insurance?

Technology has definitely changed business insurance needs. Without a doubt, it can do wonders for your business…especially now more than ever, COVID 19 has enforced the revolution by going virtual to communicate with each other, including clients.

However, we did mention in our previous blog post that technology like computers and the internet can be vulnerable and/ or exposed to risks. If you don’t have insurance or security of some sort, your business may face a large financial and operational loss.

What you need to understand is that every business has its unique needs; which is why it’s important to consult with an insurance broker or financial adviser on the type of cover that’s right for your business. Some of which are:

How to buy business insurance that’s right for you in 4 easy steps:

  1. Assess your risks – think about what kind of accidents, natural disasters, or lawsuits could damage your business.
  2. Find a reputable licensed agent – commercial insurance agents can help you find policies that match your business needs. They sell company policies, so it’s important to find a licensed agent.
  3. Shop around – you should compare rates, terms, and benefits for insurance offers from several different agents, as they vary.
  4. Re-assess every year – as your business grows, so do your liabilities. If you have purchased or replaced equipment or expanded operations, you should contact your insurance agent to discuss changes in your business and how they affect your coverage.

If you want a starting point, check this comparison of Small Business Insurance Companies in South Africa: https://comparenreview.co.za/top-10-insurance-companies-south-africa/

You may assist us by adding what you know, we would love to hear from you!

To hire employees or outsource?

At some point as an entrepreneur growing a small business, this is a decision you will have to make. You cannot do everything by yourself (forever), the more clients you get, the more hands and brains you will need. firstly, what does hiring mean, what responsibility does it leave you with, and even the pros/cons of bringing in independent contractors? This blog will contrast.

According to the Black’s Law Dictionary, an employee is a person who works in the service of another person under a contract of hire, which gives the employer the right to control the details of work performance, while a self-employed (herein Independent Contractor) is a person or entity contracted to perform work for—or provide services to—another entity as a nonemployee.

Now the question is, flexibility or responsibility?

Both contracts have their own Pros and Cons, which we discussed below:

Pros and Cons of hiring an employee:

Before bringing onboarding anyone, you need to understand that extra manpower comes with an array of legal obligations, liabilities, expenses, and paperwork. It’s important to consider hiring when your business is ready for this step, as it comes with responsibility: high turnover, absenteeism, higher healthcare costs, workplace violence, theft, etc.

fig.1. Pros and Cons:

ProsCons
You get the advantage of being able to completely control and direct that person’s work during work timeEmployees come laws and regulations from the federal government and your state regulate the payment of wages or salaries, overtime, etc
Train the person in the way you want the job done.You must also comply with payroll tax requirements.
Require that person to work only for you.And other responsibilities such as payment of unemployment insurance and worker’s compensation insurance.

Pros and Cons of outsourcing independent contractors

This means you will have less time dictating on training, management, and supervision so that you can focus on other tasks and demands of the business.

We have said this previously, having employees means having fixed costs. This particular contract gives you a great competitive advantage, controlled costs, and increased reach. You can get access to capabilities and facilities otherwise not accessible or affordable while saving costs.

fig.2. Pros and Cons:

ProsCons
You have few reporting or tax responsibilities.You can assign duties and impose a deadline but you cannot tell them how to get the job done.
You must report the amount you have paid them each year, but you don’t have to pay FICA taxes. They can work for others and often set his or her hours of work.
Their payroll responsibilities are significantly less than for an employee.

At the end of the day, it all boils down to at what level is your business, hiring is quite a big responsibility. We have talked about this on a blog before that hiring interns helps too. Before you make that decision, you need to have honest money conversations with yourself, the extra time for supervision, etc.

It’s not a train smash if you cannot afford to hire a recruiter to help you find the right talent, you can conduct the interviews yourself, but you also need to prepare yourself to make sure you get as much information as possible and ensure the interviewee is culture fit. All the best if you are about to make that decision, we hope that you found this insightful and that it helps you make an informed decision.

5 Ways Of How To Cut Costs In Your Business

Saving money is one of the prerequisites for business success. Cut costs by any means, don’t wait for your ship to sink!

Robust savings give your business the ability to grow. “It is smart to put back to push forward.”

Saving money is critical for the survival of your business, the global pandemic couldn’t be a better example – it took a toll on many businesses. Are you budgeting and making necessary adjustments for your business?

Now lets to the HOW:

1️⃣ Cut on traditional marketing. and explore the lucrative digital platforms.

Digital marketing is more affordable and much more lucrative, there are no limitations. It enables you to reach a bigger audience and when utilizing the right tools, you can reach a more specific target.

The first thing would be to find a team of experts, or outsource a freelancer while you focus on other parts of the business.

2️⃣ Outsource if you can – employees are essential to getting work done but they’re costly.

Having employees means having fixed costs. Although it’s great to have an internal team, you can always outsource freelancers. This gives you a great competitive advantage, controlled costs, and increased reach. You can get access to capabilities and facilities otherwise not accessible or affordable while saving costs.

3️⃣ Have more virtual meetings if on-site meetings are not a MUST.

There’s a lot of costs that go into one meeting: transport (worse if you are far apart), meal/drinks, plus a lot more time is lost in between. A virtual meeting only requires an internet connection.

If is it not necessary to meet in person, opt for virtual. It’s an even bigger loss if the deal is not sealed.

4️⃣ Explore partnerships and collaborations.

It’s not a cliché or a buzzword, collaboration is very necessary for growth. On the contrary, it makes teamwork successful.

The benefits include: networking and opening up new channels for communication, learning from others (especially how they do business), and boosts the morale of your business.

5️⃣ Get interns – they are more social and effortlessly improve your search engine optimization.

Most young people are generally social and like to talk about things they are proud of. Now imagine the FREE Word of Mouth you would get when they tell everybody about the great company they work for?

Did you know that hiring interns help you save on taxes?

The Employment Tax Incentive (ETI) is an incentive put in place by the government to encourage employers to hire individuals who are young and qualified but inexperienced, by reducing the cost of employing them. You just might want to think about it!

Those are just a few ways of going about it, for obvious reasons it differs from industry to industry. How are you saving and cutting off costs in your business?