numbers

What are the key figures I need to manage my cash flow?

Running out of cash is one of the biggest reasons that businesses fail. It’s not surprising really, as forecasting your cash flow can be tricky, not to mention that there are so many variables that determine how much is needed for operations, how much money you have coming in, and how much money you actually have to spend. Like we said, tricky (and a recipe for a headache).

While it is difficult, cash flow planning is absolutely essential to the success of a business. It ensures that you have the cash flow you need to not only survive, but thrive, and in any market or economy. As you can imagine, this is the dream for every business right now – to know that they are okay and that they can make payroll and keep up with the bills – in the midst of the recession.

To be in this position, you need to start cash flow planning or forecasting and here are the main 4 numbers that you need to know.

1. How much cash is in the bank 

It is crucial for a business to always know how much money is in the bank, but what makes a business successful is knowing how long that money will last based on their current spending.

Just take the many businesses who were forced to close due to Covid as an example. They might not have generated adequate cash to meet monthly outgoings (e.g. rent, paying suppliers, paying employees, buying raw materials etc) for most of this year. So how have many of them survived?

Through cash flow planning, many businesses know exactly how long they can survive before they go bust. Due to this knowledge, they’ve been able to plan ahead and make better business decisions to improve their position throughout the year.

2. Turnover (revenue and stock)

Knowing your turnover or gross revenue (e.g. the total amount of money you’ve brought in from sales) is obviously a key number to know, but when it comes to your cash flow forecasting, things like stock turnover are also essential.

Stock turnover is the rate at which you keep and use all of your stock after you have purchased it. You might not think that this number is essential to know, but stock can actually hide a lot of problems and issues within the business that you wouldn’t otherwise see if you weren’t looking.

Imagine you have been buying too much stock. Imagine the money you have available that is just sitting there. By looking at metrics like this while cash flow planning, you can know whether or not you should be buying more or less stock at a time and what effect this will have on your profitability.

3. Cost of sales

While revenue is an essential number to know, cost of sales is even more critical. Why? Because if making those sales cost you more than the money you brought in from them, you are actually making a loss and are heading for some major cash-flow problems.

Even if your business is growing, this doesn’t mean that you are heading in the right direction, so pay close attention to this number when cash flow planning. What costs are involved in making your sales (e.g. the cost of stock if you sell tangibles or the cost of labour if you sell services etc)?

A small decrease in the cost of sales can have as much impact on gross profit as a large increase in sales, so that is why it is so essential to know this number. If you’re aware of these costs, you can either negotiate with suppliers for better prices or tighten up work processes to reduce labour hours.

4. Net profit

Net profit is the ultimate measure of a business’s success. It is your bottom line, i.e. everything you’ve made after you have subtracted all direct and fixed costs.

So why is this important for cash flow planning? The net profit margin helps you to see whether you are generating enough profits from your sales and whether operating and overhead costs are being contained. If you’re not doing either, then you should know where and how you need to make adjustments.

Don’t confuse cash flow with revenue!

Revenue is only a measurement of a one-way inflow of money whereas cash flow demonstrates all movement of money through your business (e.g. income, outgoings and existing cash in the business). That’s why cash flow forecasting is so essential, as you can use it to track your business’s financial health while also planning for any expected peaks or dips in business in the future.

So many numbers besides revenue indicate profitability, so you need to manage them ALL right before you can be sure that your revenue growth is cause for celebration (not commiseration!). Isn’t that what we all need in the current climate?

What are the new business support schemes for covid-19?

What are the new business support schemes for covid-19?

Yesterday the government announced more support for businesses and the self-employed. This blog takes you through the announcements and what it means for your business.

On the one hand, it is great to see the government making available this help. But this probably means we will see fairly strict lockdown conditions between now and March 2021. We hope we are wrong about this, but in your contingency/scenario planning, particularly in regard to cash, please extend this 4-week lockdown until the end of March. If you need help with your business planning, please get in touch.

Here are the full details from the Government’s announcement.

The Self-Employed Income Scheme

On 30th November you will be able to claim a grant for up to 80% of your profits, to cover you for Nov – Jan 2021. This is capped at £7500. They also declared there will be one more grant which will cover the period Feb – Apr 2021. Details are yet unknown of when this will be paid or for how much.

To receive these grants, you need to have received the previous grants.

The ‘Furlough scheme’

This has now been extended to the end of March. Which in effect means that we are unlikely to see the Job Support Scheme operational… You can Furlough any member of staff, as long as they were on the payroll before Oct 30th 2020. And the government will pay up to 80% of their wages, capped at £2500 per month.

As a result of extending the Furlough scheme the planned Jan 2021 ‘Job retention bonus’ of £1000 for any employee you Furloughed who you still employed has been deferred. Until when? Who knows?

Help with cash flow

If you haven’t taken a Bounce Back Loan or didn’t take the maximum amount available to you, you can now top this up. And you will be able to take out a CBIL or Bounce Back Loan now until the end of Jan 2021.

Mortgage payment holidays for those who haven’t taken a payment holiday will be available for 6 months, without this being noted on their credit files.

Remember that for many businesses the deferred Q2 VAT payments, general tax and self-assessment tax is now becoming due in the next few months. Please get in touch if you haven’t already identified how you will manage your cash to make these payments. We can put you in touch with finance providers or help you organise a time to pay agreement with HMRC.

What support is there for my business in lockdown 2?

Last night the prime minister addressed the nation and announced a month long lockdown for England. Something we never considered happening in our lifetimes is now happening twice. Businesses all over the country are being forced to shut once again, and people told to stay home and save lives. If you own a business, the question now is ‘what support is available to help my business survive?’.

Firstly, we need to apologise as details are still very sketchy. Indeed, the government’s own website on the job retention schemes have not yet been updated after the Prime Minister’s announcement on Saturday evening. For more details about the support for businesses announced yesterday see the government’s press release here

This is what we are aware of at the moment:

  • The Coronavirus Job Retention Scheme or ‘Furlough’ as it has come to be known will be extended for another month on more favourable terms.
  • The replacement for Furlough, “The Job Support Scheme” due to start today, starts in early December after the Furlough scheme officially finishes.
  • A grant available to self-employed people affected by COVID-19 has also been doubled to 40% of profits, with a maximum grant of £3750 over a 3-month period.

There are still grants available for businesses with rateable premises who are forced to close due to local or national restrictions.

The good news for small business owners (if there can be a silver lining) is that now the government will put in the full 80% of wage costs, up to a max of £2500 per month, for furloughed employees, with employers only needing to cover the pension and NI contributions. And similar to the scheme rules from July, you can have your furloughed employees working part-time under the scheme.

You will be able to furlough anyone who has been on the payroll by 30th October 2020. And they don’t need to have been furloughed before. And similar to how the scheme has operated, you will make your furlough claims with your payroll submissions.

Businesses required to close in England due to local or national restrictions will still be eligible for the following:

  • For properties with a rateable value of £15k or under, grants to be £1,334 per month, or £667 per two weeks;
  • For properties with a rateable value of between £15k-£51k grants to be £2,000 per month, or £1,000 per two weeks;
  • For properties with a rateable value of £51k or over grants to be £3,000 per month, or £1,500 per two weeks.

 

If you are based in Scotland, Wales or Northern Ireland, you will have money made available to you to replicate a similar grant scheme for closed businesses.

Let’s not forget….

We’ve all been here before. We know that it is a tough time for business owners. And there are no guarantees that this lockdown will stop after the 2nd December. However, we are here for you and have got your back.

 

5 easy ways to cut overheads during a recession

So many businesses are in the position where they need to cut overheads but how do you do this without having to make anyone redundant or reducing their hours? How can you do this without having to trawl your financial reports? If you’re looking for easy ways to cut your overheads during a recession, here are 5 steps that you can take.

Number 1

What processes can you automate or eliminate? What tasks can be passed down the hierarchy or outsourced to reduce wage costs and free up staff for work of a higher value? How can you streamline your workflow? What do you do for clients that doesn’t really add value?

While the answers to some of these questions may take an initial investment, such as automating your processes, the increase in efficiency and productivity will save you in the long run.

number 2
team walking down street

Your employees are the ones on the ground, they are doing the tasks and are experiencing the potential problems and inefficiencies first hand so involve them. Ask them all the questions above that you’ve been thinking about yourself. They may come up with some great ideas that you haven’t even thought of.

number 3
Lady on phone

Make the first two steps a continuous process. For example, in every weekly team meeting, ask your team members to identify one thing which can be improved or made more efficient. If something hasn’t worked or hasn’t been delivered on time, analyse the process and see what changes can be made. If you give your team members new objectives that aim to improve the efficiency of the business, you’ll soon see that you will all start improving the way you do things naturally.


You can’t afford underperformance normally, never mind during a recession, so now is the time to address this. While setting individual targets and having regular check ins will work for some employees, others will need a bit more support. Maybe they need more training in the areas where they are struggling or for a particular software. Maybe they need to be put onto a formal performance management procedure.

number 5
Two men high five.

It’s all well and good talking about positive changes and implementing them, but you need to know if they are indeed making you more efficient and productive as a business. To do this, you’ll need to decide on your KPIs and you need to measure and monitor them. Once you have these figures, review them regularly, and you’ll be able to see if the changes you are making have been worth it.

You can reduce your overheads AND increase efficiency

The best changes, especially during a recession, are those that increase productivity as well as reducing your costs. That way, you don’t have to let anybody go and you don’t have to reduce hours. It’s all about working smarter.

Business meeting

New Grants To Boost Recovery Of Small Businesses

Thousands of smaller businesses in England are set to benefit from £20 million of new government funding to help them recover from the effects of the coronavirus pandemic, the Minister for Regional Growth and Local Government has announced.

Small and medium sized businesses will have access to grants of between £1,000 – £5,000 to help them access new technology and other equipment as well as professional, legal, financial or other advice to help them get back on track.

The support will be fully funded by the Government with no obligation for businesses to contribute financially and the support will be fully funded by the government from the England European Regional Development Fund and distributed through local enterprise partnerships (LEP) Growth Hubs, embedded in local areas across England.

LEPs are voluntary partnerships between local authorities and businesses, set up in 2011 by the Department for Business, Innovation and Skills to help determine local economic priorities and lead economic growth and job creation within the local area.

Activities supported through the £20 million can include:

  • One-to-many events providing guidance to respond to coronavirus,
  • Grants (£1,000 – £5,000) to help businesses access specialist professional advice such as HR, accountants, legal, financial, IT and digital, and to purchase minor equipment to adapt or adopt new technology in order to continue to deliver business activity or diversify.

We will provide further details on how to apply for these grants in due course.

Watch this space!

Please see:  https://www.gov.uk/government/news/20-million-in-new-grants-to-boost-recovery-of-small-businesses?utm_source=d73de287-c359-4e20-b0ee-3f50952053fd&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate

Business bounce back loan - boy on trampoline

Business Bounce Back Loans

Business Bounce Back Loans – what are they and should you apply for one?

Since the scheme launched in May 2020 (just 3 months ago), more than 860,000 bounce back loans have been issued. This means that thousands of small businesses who are struggling due to the coronavirus have applied for and received financial help; help of which will hopefully get them through this turbulent time. So what are bounce back loans? Here is what you need to know about them including a list of questions to help you decide whether you should apply for one.

Business Bounce Back Loans

While there has been a lot of financial support being dished out due to the impact of the Coronavirus, there are small businesses that can’t access this funding quickly enough; self-employed people who don’t qualify for the Self-Employment Income Support Scheme, and limited company directors who have fallen through the cracks.

For these businesses and individuals, the ones who aren’t covered by other schemes, bounce back loans are a saving grace.

So what are bounce banks loans?

Bounce back loans are 100% government-backed loans which include the following:

  • Loan amount from £2,000-£50,000 or 25% of your annual turnover (whichever is lower)
  • No interest charged in the first 12 months (the Government covers the first year)
  • No repayments needed in the first 12 months
  • After 12 months, all banks charge a fixed 2.5% interest rate/year
  • 6-year loan with no early repayment charges
  • Straightforward application and quick access to funds

Obviously, your business will always remain responsible for the repayment of the whole debt amount, but bounce back loans will provide you with significant support over the next 12 months.

Should I apply?

To help you decide whether you should apply for a bounce back loan, here are some questions for you to consider. If your answer is yes to a number of these questions then you are eligible to receive support.

  • Am I a UK-based business that has been impacted by Covid-19?
  • Was my business established before 1 March 2020?
  • Is this the only support that I am applying for (with the exception of personal support)?
  • Do I need financial help in addition to the self-employment income support grant and universal credit?
  • Do I need to repay existing finance, i.e. lenders?
  • Do I need help to pay investments or working capital for the business – including bills, running costs and wages?
  • Do I need capital immediately (within 24 hours)?

Things to note

If you would like to apply for a bounce back loan, all you have to do is contact a bank directly and fill in a short online application. You will need details of your annual turnover, your account number, the amount you wish to borrow, a copy of your tax return, and proof that your business has been negatively impacted by Covid-19.

In terms of repayments, there are no interest or repayments in the first year but after those 12 months, you will need to make 60 repayments of the amount borrowed. Unlike a personal loan, however, you won’t have fixed payments. Each month, you’ll repay 1/60th of the capital plus the interest that has accumulated that month. This means that the amount you owe will decrease over time and in turn, your repayment amount will decrease too.

If you would like to know more about the Business Bounce Back Loans book in a no-obligation free meeting TODAY!

sole traders to get second grant

SELF-EMPLOYED GET SECOND GRANT FROM GOVERNMENT

Sole Traders to get second grant from the Government.

The government’s Self-Employment Income Support Scheme will be extended, giving more security to individuals whose livelihoods are adversely affected by coronavirus in the coming months, the Chancellor announced on Friday 29 May 2020. Rishi Sunak announced the Self-Employment Income Support Scheme will be extended – with those eligible able to claim a second and final grant capped at £6,570.

  • Individuals can continue to apply for the first SEISS grant until 13 July. Under the first grant, eligible individuals can claim a taxable grant worth 80% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £7,500 in total. Those eligible have the money paid into their bank account within six working days of completing a claim.
  • Applications for the second grant will open in August. Individuals will be able to claim a second taxable grant worth 70% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £6,570 in total.
  • The eligibility criteria are the same for both grants, and individuals will need to confirm that their business has been adversely affected by coronavirus. An individual does not need to have claimed the first grant to receive the second grant: for example, they may only have been adversely affected by COVID-19 in this later phase.

Further guidance on the second grant will be published on Friday 12 June and we will keep you up to date with the details when we know them.

See: https://www.gov.uk/guidance/claim-a-grant-through-the-self-employment-income-support-scheme?utm_source=95036a42-e8c3-49f3-8f73-6300a69ea34a&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate

Time to claim your grant if you are self-employed.

The portal opens this week to claim your grant is you are self-employed. This is capped as a taxable lump sum of £7500. Once your claim is approved the money will be in your bank account within 6 working days.

To check whether you are eligible for this grant click hereDirectors of limited companies are NOT eligible for the scheme.

This is essentially ‘free’ money for sole traders whose business has been adversely impacted by Coronavirus. You will need to confirm to HMRC that your business has been adversely affected by Coronavirus. This could be because you have been unable to work, or Coronavirus has reduced the demand for your services/products.

We cannot make the claim on your behalf. (And that’s HMRC’s decision, not our decision) But we can help you decide whether you are eligible.

To make the claim you will need some important numbers:

  • Your self-assessment unique taxpayer reference number (UTR).
  • Your National Insurance Number

Click on this link to go to the portal

HMRC will then tell you if you are eligible, and the date you’ll be able to make your claim from.

If you can claim straight away, then you’ll also need your:

  • Government Gateway user ID and password (if you don’t have one of these you will be asked to create a gateway account when you check your eligibility)
  • UK bank details including:
    • Bank account number
    • Sort code
    • Name on the account
    • Your address linked to your bank account

At the moment we don’t know whether this scheme will be extended.

If you need any help please email jade@1accounts.co.uk

A bank building toy. New Loans for small businesses announced

New loans for small businesses announced

New loans for small businesses announced.

Sadly, lockdown doesn’t seem to be ending soon. This means that we are going to be seeing more pressure on the economy and the chances of this being a 12-week blip to the economy with a large bounce back are getting less and less as lockdown trundles on. Cheesy as it sounds, do remember that we are there to support you and your business through this difficult time.

In this blog I wanted to take you through some of the new announcements yesterday by the government, plus an update on what is happening with the financial package the government announced.

We are now seeing local authorities pay the £10,000 and £25,000 grants to small businesses and the first Furlough payments come through into our clients’ accounts.

Use this tool to see what financial help your business can access

The government has also put together a handy tool for any business owner to see what financial help they are entitled to or can claim or access. Go here to access.

Government announces ‘bounce back’ microloan scheme for small businesses

Piggy Bank

Yesterday, the government announced that small businesses will get access to 100% taxpayer-backed loans. This may have something to do with the fact that the CBIL scheme was struggling to get the money out to small businesses who needed it and the banks being reluctant to lend the money!

The great news is that the scheme opens next week and is said to have been simplified to an online form, which is 2 pages in length. And unlike the previous CBIL scheme, businesses only need to show they were a viable business before the COVID-19 crisis hit, and their business is negatively impacted by COVID-19.

Let’s look at the detail of the scheme which are available:

  • Loans of between £2,000 and £50,000 are available
  • The government guarantees 100% of the loan
  • No fees or interest to pay for the first 12 months (and the government pays the interest for the first 12 months)
  • The government is working with lenders to agree a low ‘standardised’ rate of interest for years 1-6 of the loan.
  • Loan terms will be up to 6 years
  • It launches formally on 4th May and the cash is believed to be available within days

Only businesses who haven’t accessed the CBIL scheme can apply. However, businesses with a CBIL loan of under £50,000 can transfer it into the bounce back loan scheme and have until 4 November to arrange this with their lender.

We are seeing reported that businesses will be able to borrow up to 25% of their turnover, however, have not been able to verify this on the government’s official announcements.

Full details of the bounce back scheme are here

If you would like to talk to us about accessing the bounce back loan scheme, please get in touch. We don’t yet know the full extent of the information which needs to be provided, but we would expect that your books would need to be up-to-date.

Do you run a children's nursery?

Do you run a children’s nursery?

DO YOU RUN A CHILDREN’S NURSERY?

Beware of the new furlough rules! 

If you operate a Childs Nursery or playground and receive funding from the County, please be aware of the new rules that were introduced by the Government on Friday.


Click here for government guidelines

Due to this change in guidance you will now need to calculate the private and state funded proportion of your income to see how you can apply to Furloughing your staff. In some cases you may not be able to Furlough staff.

There is a good illustration on the update which we have copied below to help you:

If a provider’s average monthly income is 40% from DSG and 60% from other income, the provider could claim CJRS support for up to 60% of their paybill. 

This would be done by furloughing staff whose usual salary / combined salaries come to no greater than 60% of the provider’s total paybill. 

These proportions could change in subsequent furlough applications as a result of DSG income changing (but not where income from parents increased or decreased). For example, if this provider subsequently receives additional DSG income from a local authority as a result of providing additional hours of childcare, such that its new DSG income would represent 55% of its total income in February 2020, then its maximum use of the furlough scheme should, from that point, be reduced to 45% of its paybill. 

If you need help with this we suggest that you call your accountant immediately as this will cause a problem if you have furloughed your staff.

If your accountant can’t help we will do our best to help you, just e-mail jade@1accounts.co.uk with subject title ‘Childs Nursery URGENT’  and we will do our best to help you.