Small Business Advice | How to effectively manage your cashflow

If you’ve ever run a business of any kind you’ll know that it’s cashflow, rather than content, that is king.

No matter what business you are in it’s imperative that you get a handle on this quickly. Failure to do so could end up costing you big time. I know so many people that have had great business plans and ideas that seemed perfectly workable, only to fail less than six months later through cashflow problems. Once you start to suffer from these and take your eye off the job in hand it can really start to affect your mindset and consequently your business. A lack of coffers in the bank will cause you untold amounts of stress and perhaps just as significantly alter your attitude to bringing in new deals. Once that positive mental attitude starts to go then you really are in trouble.

While much of this can be put down to bad cash management and a lack of planning, this isn’t always the fault of the SME itself – several other factors may play their part.

There’s nothing more frustrating as an SME than fulfilling your end of the bargain and doing a good job for someone within set parameters, only to be made to wait an unreasonable amount of time for your invoice to be ‘processed’ or ‘put through the system’.

The longer you are in business, the more you’ll grow to hate the accounts departments that tell you this. After all, if you’ve done the work you so you want to be paid, right?

There are, of course, several ways to approach managing your cashflow.

The accountants out there will typically tell you to define clear payment terms, invoice early, chase up late payers quickly and organise a good buffer overdraft with your bank.

However, before you even get there is something else you must think about which many even fail to consider. Does your client even have the money to pay you? Are they who they say they are? While this may sound silly or a little bit over the top it is something you must think about. After all, it’s no good doing work for a company only to find out that they have insufficient funds to pay you because they are experiencing financial problems themselves.

There are several ways you can do this. If they are a limited company you can check their status on the companies house website while other sites such as Equifax can help you make informed decisions on the potential risks involved. Where this is not possible you can ask for several references from other people that the company has previously delt with. While this can feel awkward, you should remember that this is something all large corporations do on a daily basis and you should explain that this is just part of your due diligence process.

The next and most obvious thing to do is to invoice early or attempt to get some of the work paid for in advance as this will take the pressure off you a little and can help foster better long-term relationships between both parties. After all, where large investments of both time and money are required from the SME upfront why shouldn’t customers be prepared to take some of the defined risk themselves? There is a school of thought that also says good, honest clients who don’t have problems with paying won’t mind paying a deposit for your services.

However, there is a distinct possibility in some industries that this may not be possible. In this case make sure you get the invoice out the door when goods are shipped or services completed, and make sure it contains the date and clear payment terms.

These should also include a clause for late payments at the bottom in an effort to speed up the process. Although you may not realise it you already have some protection in the form of The Late Payment of Commercial Debts (Interest) Act 1998 and Late Payment of Commercial Debts Regulations 2002 which gives businesses the statutory right to claim interest on late payments from other businesses. Be sure you also include something in the small print about processing constituting agreement with your terms. Better still, have your solicitor draw up a standard contract for you to get clients to sign upfront. In the meantime you may find this useful.

The flipside of this is making clients aware that there is a discount available for early payment or long-term contracts. Getting those retained clients onboard will improve both your sanity and bank balance. How about giving a between 3-5% discount for payment within 10 days or offering an attractive reduction to those who commit to a campaign with you?

So far we’ve talked about how to keep the flow of money coming in to your business, but there is another aspect which many SMES fail to consider and this could significantly improve both cashflow and your chances of survival. While you may be taught from an early age to stay ahead with bills and pay these as early as possible, you should try to unlearn all that you have learned and get out of this habit, retaining the money within your business for as long as you can. This means never paying a day sooner than you really have to unless you too are getting a discount for doing so. For your own employees think about them using their own credit cards or business credit cards that you issue yourself.

If this last bit is beginning to sound a tad hypocritical do remember that these are the tactics that many other well established and successful businesses are deploying to control their own cashflow. This will also help you to put things in perspective and drive your business forward without taking things too personally.

Next time we’ll take a look at factoring and how it could help you.


Small Business Opinion | The power of positive thinking

It’s not just the weather that appears to be improving at the moment. If you believe the chatter, then the expectations for recovery are looking up and there are plenty of new opportunities for entrepreneurs willing to give things a go.

While it would be foolish to think we’re out of the choppy waters as far as economic recovery is concerned, the wise among us know that times such as these are ripe for new and innovative approaches and that more often than not; it is the SME market which can take a lead in this.

Free from the overheads and micro-management of some of the bigger corporations, SMEs and individual owners tend to be more bullish in their approach to market, something that can reap dividends for those who are prepared to gamble and go for it.

Indeed, figures from a recent Regus Business Tracker study back this up, pointing out that companies with fewer than 50 employees tend to think in this way.

Of course, being smaller means businesses are more nimble and able to adapt to changing market conditions and this is another reason why those of us running SMEs should be looking positively forward. Sure, you may not have the capital lying around that you’d like to play with, but that smaller headcount and lack of crippling rent to pay on office space can be the difference in your attitude to getting things done. Free from the confines that such pressures can place upon them, many great entrepreneurs I know just get on and do things without procrastinating.

That positive mindset makes a BIG difference as to how you sell yourself and your business to potential customers, whether it be in person, online or over the phone. You’d be surprised at how many people can instantly pick up on this and it can often be the difference between closing a deal and having something blow-out.

Stand up and walk tall, enthuse about your product and tell people about the difference you can make to them. Identify your unique selling points (USPs) and make sure you get them across. Oh and that bit about standing up wasn’t a joke either. Any good salesman will tell you that their ability to sell improves ten-fold when on their feet whilst pitching. Most will also tell you that the glass is always half full…

The key thing is to remain focused on what you want to achieve and avoid being sidetracked, especially when starting out. Outsource or get help with things that are not your business, like accounting or web development and concentrate on your core competencies. Oh and remember that your entire marketing strategy should flow from your USPs. Customers want to feel loved and need to know that you can make a difference.

Start up tips | Starting a small business

Getting the basics right from the start will save you sleepless nights in the future, says Mark Dye.

Deciding to go it alone and start a small business of your own can seem daunting at the best of times. Whether you choose to work from home or are looking for premises, this and the financial side of things can end up stressing you out before you even get started.

It’s a decision I took myself back in 2005 and at the time I wasn’t quite sure what to do. Thankfully I already had a couple of clients and thought I’d just crack on with bringing in the money and sort out the finer detail later. For me the business began in my kitchen/dining room…

While this may seem like a good idea at the time – as you’re busy and the money is coming in – it’s something you can certainly regret at a later date when you realise you’ve got a year’s worth of receipts, invoicing and bookkeeping to do.

Better to put some process in at the start. The first thing for many to consider is whether or not you go down the route of being a sole trader or set yourself up as a limited company. If you have a relatively small turnover and want the simplest way to set up a business then most accountants will probably advise you go down this route. One thing to remember here is that you would be personally responsible for any debts run up by the business should you have any difficulties.

The other route, and one that keeps the company’s finances separate from those of your own, is to set up a Limited Liability.

There are various pros and cons to both of these, with the latter being more sensible if you see your company having a very healthy turnover. It’s also more tax efficient in that sense, too.

Of course, your best bet is to get a good accountant right from the very start. You can look after the financial side of things personally, but I would strongly advise against this unless you consider yourself to be a real magician on the numbers front. A good accountant will save you thousands throughout the lifetime of his work with you and that figure, which can be as small as £500 – £1000 for doing the yearly books, will feel like small change in the grand scheme of things.

If you know people running similar businesses to you, ask them who they use, the problems they’ve faced and about their experiences on this front. I found the ICAEW directory of firms and forums particularly useful too. While there are some fabulous accountants out there, others do cut corners and this could end up landing you in trouble.

Setting up your own small business should ultimately be rewarding, exciting and ultimately profitable. And by laying firm foundations and seeking solid advice, you’ll find you’re more relaxed and focused to get on with the job in hand.

Effectively optimising video for the Web

Having read David’s piece earlier in the week it got me thinking about how to get that video of yours noticed. Few would argue that film represents the easiest way to convey both us, our brands and our products to existing and potential customers out there. But with so many competitors now deploying their own how do you make sure yours stand out?

While you can’t ensure this, there are certain things you can do as a business to help optimise your video as part of a bigger overall approach to search engine optimisation (SEO). And with the right approach you might just find yourself with one of these.

Here are some tips to help get you started:

1. Optimise by targeting relevant keywords

This means including terms and keywords you think potential customers are likely to be searching for in the same way that you would with text-based content. Make sure you fit these into your file name, title, tags, URL and link text. Then, ensure you deliver a small paragraph of punchy, optimised text describing your video.

2. Upload that video to YouTube. Share it

If you are smart you’ll post your film up on YouTube as well as your own company site. Not only will this gain you great additional visibility, but it will also ensure you are indexed on Google’s own search engine. One thing you can also do here is to try to use a different title on your own site/blog so that you can try to rank for a wider net of keywords.

3. Create content worth sharing

Does your video do what it says on the tin? Is it a Purple Cow? . This may sound daft, but you need to make sure your video provides useful or relevant information to your audience or target market. Better still, give them something unique and a real reason to remember your brand. Perhaps you are trying to solve a problem or want to give them some tips for free?

It may sound clichéd these days, but remember content is still king. If yours is really good or perhaps entertaining, it may go viral and sell your product for you.

Just make sure it’s easy for users to share, rate and comment upon across other social networking sites like Twitter and Facebook. Allow them to embed it upon their site too. Oh and stick to the point. Most great videos and virals tend to be around 3 minutes or less.

4. Be trigger happy and get linking

Reach out and cross-link to other videos as well as linking to those from other relevant web pages. You’ve got to think in the same way about video SEO that you would for other forms of digital content here – this means building great internal and external links. Look to add links to videos in blog posts and other social media pages. Oh and tweet it.

5. Box clever

Give search engines as much content to go on as possible and surround videos with copy that can be indexed. Why not get creative, repurpose your video and use it for blog posts or break it into snippets. The more you optimise, the better.

In all of the above just try and remember whom it is you’re trying to engage with and what you want to achieve. This should keep you focused on the job in hand and help you produce content that’s a credit to you and your business.

If you think I’ve missed anything or have any other useful suggestions let me know with a comment.


Will the 2010 budget be one to secure votes and be good for SMEs? Probably not..

Hi all,

My name is Mark, and I’ve just joined the Business Heroes team to add some additional insight. Worried about tomorrow’s budget? Here’s my two-penneth…

Budget 2010

This Last year’s budget was a mixed bag for SMEs. While a continued delay on corporation tax and increases in capital allowance to 40 per cent may have been helpful, many were left feeling underwhelmed by Alistair Darling’s moves – especially that 50 per cent tax increase, hardly an incentive for Britain’s entrepreneurs!

Cash-flow was certainly one of the main worries of 2009 with many SMEs going to the wall while others suffered from a lack of easy access to finance from banks and financial institutions who, as we know, were having a very public nightmare of their own.

There were also calls among SMEs for a government funded wage bill subsidy for short-time working that fell on deaf ears. Indeed, even the launch of a £750m investment fund to provide support to emerging technologies in green, digital and energy areas, plus the introduction of a top-up supply chain insurance to help companies protect themselves against non-payment won’t have helped soothe the pain for SMEs who have felt little in the way of support.

So what does tomorrow’s budget hold? In truth, probably nothing new. Labour is looking to secure votes for another term in office but must be seen to be making plans to get public finances back in order. Yet at the same time there are still very real fears we may dip back into recession.

One thing we know for sure – and one that all parties agree on – is that public spending must be cut and Labour’s promise to reduce the budget deficit by 50 per cent over the next four years will have a major impact. And although the government has promised to spend more of its money with SMEs, these are likely to feel the pinch from a swathe of public spending cuts across the board.

Of course Taxes will go up and this has been widely expected with many businesses already preparing themselves for a 1 per cent rise in employers’ National Insurance Contributions from April. That said, VAT and corporation tax are widely tipped to remain the same while Capital Gains Tax could well rise. Again, a mixed bag.

Then there’s the good news that HMRC will be upping the ante when it comes to collection as new powers are bestowed upon it. These may include increased anti-avoidance measures and a greater allowance on setting interest rates charged on outstanding tax payments, while at the same time tightening rules on rebates.

The government will also be looking to reduce unemployment levels through a number of schemes and this is certainly one area in which small businesses will probably see budget benefits from through added hands on deck.

Whatever happens, small businesses should proceed with caution as any positives seen may be over-optimistic forecasts on Labour’s part if previous attempts are anything to go by. Then there’s that huge deficit that the treasury simply has to reduce which is not going to go away in a hurry.

I’m afraid, as far as the budget’s concerned at least; it’s more of the same for SMEs in 2010. Bah.