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Category Archives: Cashflow

Fixing Cash Flow Problems

Fixing Cash Flow Problems

For most businesses, cash flow tends to fluctuate up and down. Some months sales are high, others, sales are low. A sudden emergency can arise and drain the finances, or a stream of customers can be late with their payments. If cash flow is starting to cause problems, it’s important to find out why the problem is happening, and then implement a solution.

Causes of Poor Cash Flow

Poor cash flow generally happens because of one of four possible causes:

1. Sales Are Too Low

Poor sales could be caused by:

  • Your prices being too high;
  • Insufficient demand for your product or service;
  • Your sales and marketing efforts not working. ●
2. Expenses Are Too High

If your sales are healthy, but you still have cash flow problems, you may need to look at your business expenses. It’s not uncommon for business owners, especially in small businesses, to ramp up spending when sales are high.

3. Customers Are Not Paying

If sales are high and spending is normal, the most likely cause of your cash flow problems, is around your customers who have credit but not paying their accounts quickly enough.

4. Holding Excess Inventory

Often businesses are holding inventory which is potentially obsolete or extremely slow-moving, which leads to taking up unnecessary floor space. It is better to sell the inventory at reduced margins or at a loss, so that the generated cashflow can be reintroduced into the business, so that it can be used to purchase new inventory in lesser quantities, that meets current market demand. I refer to this as the Circular Flow of Cash.


Once you have identified the cause/s of your cash flow problem, you can focus on a solution, depending on the cause. Here are some ideas:

  • Hold a cut-price sale: sure your margins might be lower, but you are aiming for volume. The net effect is cash coming into the business quickly.
  • Raise your prices: a rule of thumb is that if you raise your prices by 20%, you will only suffer a drop in demand of around 10%, which is a very good net result. But you must be able to demonstrate to the customer, (especially repeat customers) why they should pay 20% more.
  • Tap your line of credit: a business line of credit is preferred to almost any other type of financing, because of the revolving nature and affordable terms. With a business line of credit, you only have to pay interest on the amount of credit you use. And once you pay off the debt, you immediately gain access to the full amount again. It’s essentially a credit card for your business.

For self-help articles to help you manage and grow your business, visit our Client Hub.

How did you find the article? This is a chapter from my book: Starting a Business, Growing a Business. The Critical Insights No One Tells You About, But Should. If you are in business, you know how challenging it can be at times. If you’ve thought about running your own business, you’ve probably heard the odds are against you being successful. But all is not lost… Get your copy of my book where you will learn more tips to keep you on the path to success!

strategies to improve cash flow

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If you want help identifying problems in your cash flow and formulating solutions to resolve them, you can check out our Cash Flow Management Coaching or simply book a call so we can discuss the specific needs of your business and how to best approach it.

cash flow management

Succeeding in Tough Times: A Guide to Business Continuity

Succeeding in Tough Times: A Guide to Business Continuity

It’s no secret that times have been tough for a record number of businesses across the world in the wake of the global pandemic.

For business owners in every country, the question of continuity has been a big one over the last 18 months. Running a successful business is already challenging enough — but throw an unforeseen set of factors into the mix and many entrepreneurs find themselves navigating uncharted territory more now than ever before.

So, how do you keep your business succeeding in tough times?

Are there practical steps you can take to keep your business running in the black no matter what’s happening in the world?

Here at Insight CA, we have some good news: yes — and it’s far simpler than you might think. Upping your chances of business success actually isn’t that hard, even in tough times like these.

Before we dive into our ‘this-seems way too easy’ guide to business continuity and succeeding in tough times, let’s have a quick word about risk.”

A word about risk

At every stage in the game, risk management is a concern for small to medium (SME) business owners. And while each business is unique, we’ve found that business owners of all shapes and sizes have common experiences and share common concerns.

As a business owner, it’s easy to believe that you have a viable level of control over external factors that affect your business. You might be confident that you’re adequately managing your risks — even though this may not actually be the case.

Risk management can be a literal minefield littered with unforeseen circumstances and surprises around every corner. And while there is no ‘one-size-fits-all’ solution, the starting point is for business owners to identify and prioritise the risks that affect their business. 

Risks can develop quickly and unpredictably, even if your business operations are riding an even keel in the black. It’s not always safe to assume that the status quo is a given, and your business’s operating conditions are always subject to significant impact — even in periods of success.

For instance, take the global pandemic.

Who would have guessed that in the space of a few weeks, we’d witness the lockdown of entire countries, suspension of stock markets, international travel bans and massive market volatility. It’s a testament to just how interconnected we are as a world and how vulnerable our economies really are.

Success in our ever-evolving, modern world means more than just embracing change — it means understanding and managing the broader risks that come with running a business. And knowing just how quickly you’ll have to duck and dodge.

So, what are some reliable, foolproof ways to circumvent risk within your business?

Here are a few tried-and-tested tips from the experts.

Mitigating risks 

What do all the best athletes, entrepreneurs, and business people in the world have in common?

They’ll all tell you that when it comes to minimising risk, it is crucial to move quickly.

You may be thinking, “Alright, duly noted — but what is the first real step I can take to set this in motion?”

We hear you.

Many SMEs are looking for solutions, ways to lighten their load — but they can’t do it alone. Especially during uncertain times, SME business owners need the added support of a trusted business advisor.

A rising number of SMEs are being overwhelmed with surmounting challenges and increasing pressures facing their businesses, with a staggering 61% of SMEs reporting a high (29%) or very high (32%) degree of owner reliance, according to our 2021 SME Report.  The silver lining: business owners can alleviate the pressures behind these numbers simply by bringing in an advisory professional.

And while profit margins and bottom lines are what SME business owners scrutinise most, the support provided by a trusted adviser goes well beyond looking at the numbers.

Speak with your chartered accountant or business advisor as soon as possible about your concerns and business goals. They can help you to re-examine your business plan — and to do it with a sense of urgency.

It’s a great place to start, and a relatively small step that might just inch you closer to a successful outcome.

Don’t make the mistake of waiting. Procrastination can work against you when you’re dealing with risks like volatile markets and global economic concerns.

What is your current situation and how is your business planning for the future? After a careful assessment, you may find that it’s time to scrap your current regime and start fresh.

Another thing to remember: advice can go a longer way than you think.

Both independent and objective advice (from qualified and experienced professionals, of course) can help you to curtail risk and position your business for long-term success.

And it can ultimately mean the difference between your business thriving or simply surviving.

The bottom line: throw everything at the wall and see what sticks. When times are tough, it can’t hurt to gather as much knowledge and information as possible. Having more information at your disposal will enable you to pick and choose which practical applications work for your business’s specific situation.

To help you quickly assess existing risks within your business that may be affecting your profitability, check out our handy Risk Survey, a diagnostic tool designed to help you benchmark your company against the industry.

Protect your best assets 

Have you got a few select clients that are really your bread and butter?

It turns out that those high value customers are more important now than ever before.

As times change, so does your B2B and B2C dynamic. Rapid and unpredictable change on the global stage will likely shift how each and every one of your clients does business. For you, it’s about being there to accommodate that constant influx of change in your clients’ situation.

And to foster trust in the process.

Make contact. Reach out to your highest grossing customers to remind them what’s on your services menu and that you’re there to offer your continued support.

Even more good news: this slice of high ticket clients likely makes up just a small fraction of your overall customer base, so this process shouldn’t be too time-consuming.

Checking in often will help to establish a rapport with your most valuable clients, who are likely grasping for a helping hand now more than ever.

Protect these key relationships and you’ll construct a safety net that can not only carry you through tough times but also pave the way for more potential business down the line.

Reduce your costs

When times are tough, you’ll need to rethink many aspects of your business. And it may be time to take a systematic approach.

Perform a cost-benefit analysis. Place your current assets under the microscope. Are your fixed costs as low as they could be? How many variable costs does your business handle each month? Have you got any unnecessary expenses floating around under the radar?

For doing business in tough times, you’ll want to keep your fixed costs low. Try to eliminate any superfluous or extraneous expenses that don’t ultimately increase profitability, like non-trading costs.

Variable costs, on the other hand, could work in your favour. Investigate ways to migrate your business’s expenses from fixed to variable. Outsourcing is often an effective variable cost strategy.

For some valuable guidance about improving your business’s performance, check out our 2021 SME Report, a comprehensive guide for curtailing risks and optimising your business in the current climate.

Take care of your own

Did you know that you can use periods of risk as opportunities to touch base with your staff?

It doesn’t stop at keeping your highest-grossing clients warm.

So, go ahead — give your staff some added incentives to remain with your company. Is there a holiday coming up where your employees could use a day off to do some shopping? Do you have a few star employees that deserve some recognition to boost morale?

Ask yourself: why not take a human approach when dealing with your staff? This can go a lot further than you might think — and keep your best and brightest from jumping ship.

Simply put: increase morale and you’ll also increase employee retention. The two are directly proportional.

Highlighting achievements within your team is actually one of the smartest moves you can make as a business owner, and it costs you absolutely nothing. Employees who feel seen, heard, and recognised will often make efforts to maintain consistency, synergise with other employees, and generally work happier. And as the old adage suggests, happier workers work harder.

Taking care of your own is a simple, low-cost, and effective way to keep your business strong and strengthen your bottom line.

Because at the end of the day, your high-profile customers aren’t your only asset — your staff is the behind-the-scenes driver of these key business connections.

Collect Cash

Collecting cash from your customers in these tough times may prove more difficult than it used to be.

Watch your cash flow carefully. You may even consider amending your policies to focus more on debtor collection and stock management.

This means placing tighter limits on the amount of credit you extend to your customers. 

And if you have exposure to large customers, it may be time to obtain some assurances or guarantees about how they will pay their account. Speak with their accounts payable or billing departments to make sure a concrete, ironclad arrangement is in place.

Be proactive. Take decisive action in a predictive way — rather than a reactionary way.

Follow up on your largest customer accounts before they become overdue. This practice will insulate you from having to chase down your highest grossing customers later. Protect yourself now by exercising a little more caution than you normally might. In the long run, you’ll be glad you did.

But what about investing?

We’re glad you asked.

Keep your stock ordering proportional to customer sales. If your sales are falling, lean out your investment strategy and take fewer liberties than you ordinarily might.

Desperate times call for desperate measures, so trim the fat by exercising a bit more frugality during uncertain times. This will allow you to save capital for when markets bounce back to better numbers.

Remember: if your customers’ tendencies, spending habits, and general behaviours are trailing in a certain direction, you must adjust course to suit. Trends within your own customer pool are usually good indicators of what’s on the horizon — so act accordingly.

Hiding in plain sight

Risk isn’t always external, and it doesn’t always look so obvious. It often hides in plain sight — and it could be lurking between the lines in your own company.

And the answer goes far beyond HR.

Before you take a gander at restructuring your internal job structure, we urge you to reconsider reducing your staff or eliminating job roles from within your company. Cutting your workforce scarcely solves long-term expenditure issues — and it could leave you shorthanded (and vulnerable) once market fluctuations die down.

A viable solution? Perhaps some of your existing employees could learn how to multi-skill to increase their per-hour employee returns.

We think it goes without saying that as a business owner, you must be prepared to make some hard decisions — especially during tough times. Multi-purposing your already existing staff, while challenging, could be one of the smartest plays to make sure you’re better prepared to face ongoing external risks.

Remember: tough times don’t necessarily call for staff reduction!

Risk, meet Reward. 

A precariously wise man once said, “There can be no reward without risk.”

And while we are inclined to agree, we think that risk can and should be curtailed at every opportunity.

When you implement the simple, effective, and low cost strategies we’ve outlined in this guide, you’ll find that risk transforms into reward. And that reward is the impenetrable continuity of your business.

Want to know more?

If you’d like to speak to someone about mitigating risk and keeping your business running successfully in these tough times, get in contact with us today to organise a free, no obligation chat. We will listen and formulate the best strategies to help you achieve your goals. Alternatively, click on the Book A Call button now to get started.

cash flow management

Are you looking to improve your cash flow and make it more consistent? If so, we recommend reading this article next for just the right strategies you should know about.

Best Strategies to Improve Your Cash Flow

Best Strategies to Improve Your Cash Flow

As a business advisor and chartered accountant, I believe my job is not simply to crunch the numbers. Sure, it is important to know where the money is coming from and going, but it is also important to make sure money (cash flow) is coming into the business, consistently. In fact, the number one reason for businesses failing is poor cash flow. Cash flow is confidence.

Cash flow is created by:

  •  Generating leads (marketing);
  • Turning those leads into customers (sales).

There is no limit to the strategies you can use to bring in business and turn prospects into cash-paying customers. Let us discuss business marketing strategies:

Marketing comes in many shapes and forms, let me share with you some of my favourite ideas.

Gift Vouchers

For around a dollar, you can create an extra product that people can purchase for others. A gift voucher provides flexibility for people who are unsure which of your product range may suit the person they are buying for. Do not include too many “Conditions of Use”, as people are paying you cash in advance. It is wise to include an expiry date, but do not exceed 12 months. Make sure your voucher is attractive and well-designed, and is presented in a quality envelope. Make your vouchers difficult to duplicate – include a serial number and log the vouchers into a gift register.

Customer Referral System

If every customer referred one person to you, your business would double. Most businesses say they rely on “word of mouth”, but very few have a system in place to generate those referrals. Do not assume that customers are reluctant to make referrals. Your customers like you, trust you, and believe you provide quality and value, exceeding that offered by your competitors. Otherwise they’d be using someone else! But you have to make it easy and rewarding to refer others to you, (they won’t always be thinking of you; it is your responsibility to remind them).

The best way, is to just ask them for referrals. Identify your good customers and tell them you appreciate their business and want more loyal customers like them. Most people will be flattered and only too keen to help. Give them a voucher to give away, and another one to keep for themselves.

Another idea, is to invite your best customers to a Customer Appreciation evening, (or a seminar) and ask them to bring one or two friends along. This must be an event that provides genuine value. Make it all about them, not you. Do not make it a sales pitch.

Regular Specials

Everyone enjoys a bargain, because it makes them feel like a winner. By offering them extra value, you give them an extra reason to buy from you, (especially if your competitors refuse to offer special deals). But the real trick here is to offer special deals ​on a regular basis.​ If you offer a new deal every month, you will be amazed how people will keep you in mind and check out what your upcoming deal is. It also keeps your marketing message fresh. If the deal only lasts a month, (you can make it shorter) it creates a sense of urgency, because people don’t want to miss out. If you start with just six special deals, you can offer these twice a year. Here are some examples:

  • Two for one deal;
  • Buy one, get the second one half price;
  • Spend $100 and receive a free [item]
  • Free delivery worth $35.00;
  • Free seminar worth $45 (limited places);
  • Free installation worth $45.00.

All the major supermarkets know the power of having regular specials. As we browse the meat section, we are so easily drawn to the current specials and load up the freezer if we find a bargain.

Customer Guarantee

Every time a prospect buys from you, they take a risk. How do they know if the product or service they purchase, will meet their needs? What if it fails? Do not assume they will happily return it, as many people feel too embarrassed to make a fuss. If they are unsure if it will work, they will simply choose not to buy it. You can reverse the risk, by offering them a guarantee. Many business owners say, “I can’t do that. What if they keep enforcing the guarantee?” It makes sense that it should be the seller, not the buyer, who takes the risk. It is the seller who should back the quality and effectiveness of their product or service; and they are in the best position to put things right. Naturally, you want your customers to be happy with their purchase, (otherwise they will share their bad experience with others)?

The Warehouse​ may not offer the highest quality products on the market, but you know if your item is defective, you can return it and get an immediate and full refund, without any fuss.

Legislation like the Fair Trading Act and Consumer Guarantees Act, exist to protect the public, and business owners need to accept this trend will only grow. If you are uncomfortable about offering a wide guarantee, you can simply word your guarantee so that it reflects the customer’s rights under the law.

Loyalty Card

If you want customers to keep coming back, give them a reason to do so. They have already bought from you, so it doesn’t take as much effort to get them to make subsequent purchases. Cafés know how powerful this is, because they offer their coffee cards, e.g. buy 10 coffees and receive your next one free. They know that the free coffee only costs them less than a dollar.

This strategy works well for businesses who offer products and services that customers buy on a regular basis, as opposed to items they buy rarely.

Bundling Products

This is a proven way to increase the average sale per customer. A prospect may approach you with the intention of buying one item, but you can tempt them to increase their purchase, by adding other items to their order. This is called “bundling.” Takeaway shops use this strategy very effectively. While you can customise your order, the retailer offers (say) a $10, $20 or $30 pack that is worth somewhat more value than that. Tyre retailers will offer deals for replacing all four tyres on your car, plus a wheel alignment. Bus companies and fitness centres will sell multi-passes at a discount.

Bronze, Silver, Gold Options

A clever way to upsell your customer, is to offer tiered packages. This may be offered as a Bronze, Silver or Gold package. The business draws the prospect in with a low-priced “bronze” offer, with the intention of persuading them to upgrade to a higher-priced (more profitable) silver or gold package. Airlines do this well. They might offer a cheap “budget” fare, but then offer upgrades (and add-ons), which the customer finds hard to refuse. This can include an upgrade to a better seat, or to business class. It could include paying for meals and entertainment.

Domino’s​ offer a $5 pizza, but as you browse through their offerings, you may find more expensive pizzas to order. I often wonder how they can offer a $5 pizza and make a profit, but it is probably just a loss leader. They make their money on all the upgrades and add-on sales.

The starting point is to create your “bronze” offer. What is a basic, low-priced offer that will appeal to most of your prospects? How can you present it in a way that they find it difficult to ignore, (remember, the goal is not so much to get them to buy the bronze product. It is simply to use it to get the prospect’s attention and for them to look at your other offerings).


I heard of a hardware store that used a checklist strategy to increase sales. When a sales assistant approached a customer and found out they were painting a room, they produced a comprehensive checklist, pen and clipboard, for the customer. Instead of the customer buying a $20 paint brush, they might end up walking off with paint thinners, sandpaper, drop-sheets and a ladder – a $300 sale. Business owners may feel this is pressure selling. I prefer to see it as providing excellent customer service; (Imagine the frustration when the customer returns home and discovers the items they didn’t buy!)

I know a lawyer who trains all their legal employees to talk to their conveyancing clients about wills, powers of attorney, property sharing agreements and family trusts. Not a single client has ever complained or felt pressurised. Rather, they felt their lawyer was looking out for their best interests.

A restaurant’s menu is a checklist. A hairdresser and beauty therapist will often provide a list of their services, to show the prospect what they can choose. But these tools are really just a “catalogue” that appeals to all their customers. Instead, take the time to break those products and services down into groups, so that they appeal to customers with a particular need.

Joint Venture Relationships

If your advertising or lead-generation ideas have failed in the past, it’s very likely to have arisen because you have targeted “cold” prospects, i.e. people who don’t know you and/or have never bought from you before. But you will achieve much better results, (300-400% better results) if you seek leads/referrals through your existing database. This is because you have an existing relationship with these people. They know you, trust you and are more likely to act on any offer you make – compared with people who haven’t dealt with you before.

But you don’t want to limit your marketing efforts to your existing customers only. There are thousands of new prospects out there to target. But how can you tap into this lucrative market, without approaching them cold? Easy – by approaching them through someone else, who has a pre-existing relationship with them. It’s called “joint venture marketing”, and in my opinion, it is the most exciting and under-utilised form of marketing. Here’s how it works …

Who do you know locally, (a friend, family member or customer) who owns a business with lots of customers that fit your target market profile; and someone who really looks after their customers? Imagine how great it would be, if they were to tell their customers about you.

But very few, if any, business owners will help you, if it takes too much time, effort or money; or if there is no benefit to them, in doing so. Therefore, I suggest you print out vouchers or referral cards, for the other business owner to give away to their customers. If done properly, it can make them look like a hero to their customers.

I know of a mechanic who works with a panel beater. He gives the panel beater the following vouchers to give away to customers, (with a short note to say nice things about the mechanic):

  • A free set of wiper blades (fitted);
  • A free WOF;
  • A free engine steam clean;
  • A half price service;
  • A free safety check.

The more generous that your offer is, the more likely it is the prospect will take up the offer. The cost of the offer is your investment to gain a new customer.

Let me finish by saying, that this tool has the ability to return tens of thousands of dollars in extra business, especially when you consider the lifetime value of a customer. It costs very little to implement and will set you apart from all your competitors – how many of them are doing this?

Here is what you need to do:

  • Find a joint venture partner, whose customers fit your target market;
  • Develop a special offer or giveaway, that would appeal to those customers (low cost to you; high value to them);
  • Create the offer as a voucher, flyer, letter etc;
  • Approach the other business owner and sell the benefit of the idea, in terms of their interests, not yours.

Sales Techniques

No business will succeed if it can’t sell its products and services. Selling is the process of converting prospects into customers. There is no such thing as a “born salesperson.” If someone is good at sales, I bet they have been trained well and they follow a proven sales process. While there are many ways to sell, here are a few strategies which, if implemented, will certainly improve your conversion rates:

Building Rapport

We tend to buy from people we know, like and trust. It takes time to build rapport and generate trust. Here are a few simple and practical tips to get people to like you and trust you, faster:

  • Use their name and pronounce it correctly;
  • Smile often, as appropriate;
  • Take a genuine interest in them, rather than talking about yourself;
  • Find common ground between you;
  • Use common courtesies, e.g. thank you, please;
  • Compliment them genuinely, but don’t overdo it;
  • Be a good listener, and don’t interrupt them;
  • Maintain eye contact;
  • Be positive and don’t criticise them or others.

You must tailor your rapport-building, to the other person’s personality. Sociable people like it when you spend a lot of time building rapport and can find you pushy if you talk about business matters too quickly. But direct people, will get frustrated if you are too friendly for too long; they prefer you to get straight to business.

Asking Quality Questions

If you want to be more effective in sales, master the art of asking the right questions. Have you ever heard people praise a salesperson, by saying they have “the gift of the gab?” It’s true, that a good salesperson knows how to say the right things, but only after they have discovered certain critical things about the prospect. This is where the ability to ask quality questions, comes into play.

Screening Process

The first set of questions to ask, are “qualifying questions” which screen the prospect, to determine whether they are likely to want your products or services. Unless the prospect has approached you, you can’t be obvious with these qualifying questions, otherwise you can come across as being a pushy salesperson.

A good real estate agent knows to ask subtle questions, to quickly determine whether the prospect is a local homeowner. A consultant knows what questions to ask, to find out whether the prospect is a business owner.

What subtle questions can you ask, to qualify (or disqualify) a prospect? What critical features do they have to possess or lack, to be a potential customer for you? How can you phrase those questions, so they sound genuine and caring, as opposed to being pushy, aggressive or self-serving?

Discovery Process

Once you have qualified the person as a good prospect, you need to discover whether they have a need for your products or services. Not only that, you need to ask the questions in a way that they feel that they really do need your help.

The first part of the discovery process, involves asking “Now questions.” You are trying to find out where the prospect is right now. Who is their current supplier? What is working well, and what isn’t? How much are they spending? What problems are they experiencing? Do they make these decisions on their own?

The second stage is to ask “what if” questions, which are designed to find out what the ideal solution would look like from the prospect’s point of view. Here are some examples:

  • Describe the perfect product/service for me;
  • How would you like it to be?
  • If you could have the perfect product, what would it look like?
  • If it could work better or faster or more efficiently, what would that look like?
  • How soon would you like to achieve this desired state? Why?

Note: You are not making any promises that you can deliver this future state. You are just trying to find out what is important to them. In the back of your mind, however, you might be working out how your business can meet these needs.

The third stage is to find out what their barriers and obstacles are, i.e. to discover why the prospect has been unable to achieve their perfect scenario. I like to ask, “So what has been stopping you from achieving that outcome?” When they give me an answer, I might ask them to expand, or just ask, “What else?”

The final stage of questioning is to ask, “How important is it to you ​personally,​ to have that sort of result?” This is to discover their motive to change. The stronger their emotional drive, the more likely they are to do business with you; (you really need this if you expect them to leave their existing provider). The following example answers mean you have a very motivated prospect in front of you:

  • It means my family will be proud of me at last;
  • It means I can feel good about myself;
  • It means my boss will finally trust me again;
  • It means I can provide for my family;
  • It means I can protect my family;
  • It means I can sleep at night;
  • It means I will live a long life.

So that’s the questioning process. When was the last time a salesperson had a conversation like that, with you? Probably never. That’s because most salespeople don’t ask any, or certainly not enough, quality questions. They go straight into selling mode and start talking about them and their products and services. But if you think about it – how can they persuade you that you need their products and services, when they don’t know anything about you?

Please note:

  • You can choose to ask these questions in sequential order or mix them up. The prospect might mix up their answers, which is okay (don’t correct them and ask them to stick to the script, because you don’t want them to know you’re following a process).
  • You are not selling during the questioning phase. You are only gathering information that you need when you offer your solution. It is tempting to jump in during the questioning phase and say, “I have the perfect product for you” or “I can help you with that.” You must resist that temptation, otherwise you will lose your momentum and frustrate your prospect, just when they were beginning to trust you and think you actually care about them.
  • The more complex and expensive your product or service is, the more time you need to spend in the questioning phase (and vice versa). You would only do a shorter version of this process, if you were a tyre retailer. But you might spend a couple of hours asking questions, if you build new homes for people.

Presenting Your Solution

Now that you know what the customer needs, you get to have your say. This is when you get to share with them, how you may be able to help. This is when you talk about your product and services. In giving your proposal, you want to:

  • Show them how you will take them from their “now” to their “desired state”;
  • Explain how you can help them overcome their barriers and obstacles;
  • Remind them how good they will feel when they reach their desired state, (this is the emotional step);
  • Why your offering is so much better than what they are using, (or not using) at the moment;
  • What the features and benefits of your offering are.

All your statements will reflect the things that are important to the prospect. They will not include anything that the prospect indicated was unimportant. You know these things, because you asked all the right questions. Being a good salesperson is as much about what you don’t say, as it is about what you do say.

Closing the Deal

Once you’ve presented your solution, it is important to ask for a decision. You should do it confidently, immediately, and in a way that assumes they will say “yes”. One of my favourite ways to do this, is to simply say “So, I suggest we get the process started, by filling out a Client Information Sheet and booking in our first consultation next week. Does Thursday at 10 am suit you?” This is called an “assumptive close” and it makes it difficult for the other person to say “no”.

Handling Objections

Of course, there is no guarantee the prospect will say “yes”. They might have a few objections. You must be able to confidently answer these objections. I expect 95% of the objections will be the same. They might include:

  • That is very expensive;
  • I don’t think I need it;
  • I’m not sure that will work;
  • I can’t afford that;
  • It isn’t the right time for us right now;
  • Let me think about it;
  • I need to talk to my partner;
  • Can you leave me with some information?

I don’t want to go into all these objections in detail, but I want to make a few comments about the much-feared price objection:

  • They should have discussed their budget during the questioning phase;
  • If they literally don’t have any money to pay you, you should have picked this up in the screening phase;
  • It probably isn’t about the money. Rather, they haven’t seen the value in your solution;
  • It might be an excuse, for another reason that they are reluctant to share. You can overcome this by saying “Apart from the Investment, is there any other reason why we can’t proceed?”

Once you’ve answered their objection to their satisfaction, ask for the order again, using a slightly different method, (don’t use exactly the same one you did earlier, but you can refer to it). For example, “Well, I suggest we get started. Here is the Client Information Sheet and a pen.”

I just want to finish, by saying this: it might feel awkward to sell this way at the start, but you will get better as you practice it. Don’t revert back to your old ways that lost you more prospects than you won. Dare to be different and stand out from your competitors.

In case you’re wondering, the above process follows the teachings of some of the best sales coaches and training organisations in the world. All their advice follows a method that is identical, or very similar, to what I have shared above.

How did you find the article? This is a chapter from my book: Starting a Business, Growing a Business. The Critical Insights No One Tells You About, But Should. If you are in business, you know how challenging it can be at times. If you’ve thought about running your own business, you’ve probably heard the odds are against you being successful. But all is not lost… Get your copy of my book where you will learn more tips to keep you on the path to success!

strategies to improve cash flow

Contact Us

If you want to earn more consistently and learn more about the cash flow of your business, you can check out our Cash Flow Management Coaching or simply book a call so we can discuss the specific needs of your business and how to best approach it.

cash flow management

The Key to Managing Debt for Small Businesses

The Key to Managing Debt for Small Businesses

Challenges for small businesses coping with debt

Taking risks is part of running a small business and debt is one of those risks, but it is also a positive tool for small businesses that is usually necessary in order to fund your growth or keep you afloat. You can’t easily plan for recession, pandemics, natural disasters, or other negative events, because if you take a too-cautious approach then you’ll never succeed. But sometimes the odds will go against you.

If you find yourself unexpectedly further in debt than you’d like, don’t panic. There are options available but they require action. If you sit back passively and wait for the worst to happen, it just might.

So take action. Manage what you owe before it becomes unmanageable. Here are some useful tips to help you take control of your debts.

Understand your situation and take action

If you’re facing increasing debt, take action instead of hoping for the best. If you fail to make payments on your debts, the consequences are often disastrous. They can include loss of employees, seizure of stock and costly court cases brought by your creditors.

Potentially worse than that is the risk of government intervention. If you fail to pay the taxes you owe, the government will come after their money.

Depending on where you live in the world, governments have the authority to get their money any way they can. They can seize your business assets, help themselves to the contents of your bank account, declare you bankrupt and even take personal assets such as your house or car. Sometimes this can be done without even a court hearing.

So stay sharp and aware of your situation. Use good quality accounting software to keep a close eye on your outstanding debt and monthly payments. This information should be at your fingertips at all times.

After that, your priorities will depend on the type of business you run and how flexible your suppliers are willing to be. The following payment priorities are suggestions, but the actual order is for you to decide:

  • Payroll
    If you don’t pay your employees’ wages on time you may be penalised for this. You may be able to renegotiate contracts with some staff, but that’s likely to affect their morale.
  • Suppliers and business partners
    Avoid losing valuable goodwill with your most loyal suppliers and business partners.
  • Aged payables (60 days or more)
    If you don’t pay, your credit score will be impacted, which will affect your ability to borrow money in the future.
  • Bills
    Outgoing costs such as rent and utility bills need to be paid to keep the lights on! And again, not paying these could affect your credit rating.
  • Secured debts
    If you run your business as a sole proprietor or partnership, you might be held personally liable for debts, and creditors could try to take your assets. This is one good reason to form a corporation or limited liability company.
  • Insurance
    Especially professional indemnity and public liability cover.
  • Credit cards
    Avoid penalties or interest charges as these can pile up quickly.

Good accounting software is vital here. Without it you’ll have little idea who, and how much, you’re paying each month.

Renegotiate, refinance or consolidate bank loans

You may be able to renegotiate your bank loan so it’s spread over a longer term, to reduce the interest payments and also the monthly repayment cost.

The bank may want to charge a higher rate due to the perceived increased risk of default, so you won’t save as much money as you might like. Even so, this can give you some breathing space.

You may be able to combine your business loans into one payment that will reduce monthly costs and not adversely affect your credit score? Talk to debt consolidation companies about this, but read the small print carefully.

Consider refinancing, if your credit record will allow it.

Discuss more favorable payment terms

Talk to all your creditors. Explain the situation and make it clear you have a comprehensive plan for resolving it. Stay positive – tell them you want to pay in full but need to renegotiate terms for that to happen. They should understand that it’s in their interest to accommodate your request. After all, if your business fails they’ll get nothing back.

Be proactive here. If you approach your creditors before they start chasing you for missed payments, they’re more likely to take you seriously and agree to your terms.

Increase your revenue

Easier said than done, of course, but there are ways you can boost short-term revenue. By taking action, you could reduce your debt payments enough to get you back on track.

  • Offer your customers mark-downs or reduced prices
    Discounts for fast payment can help improve your cash flow.
  • Get to know your customers better
    Get their feedback on your business so you can tailor what you sell to meet their needs better – and maybe charge a mark-up for doing so.
  • Meet with your accountant, financial planner or banker
    Share your business plans and see if they can introduce you to some of their other clients, perhaps in exchange for a small finder’s fee.

Reduce business costs: Three tips to consider

Think about where you can cut costs. Use accounting software to list your largest outgoings and see where you can make reductions. For example:

  1. Reduce the amount of space you rent or lease, especially if you’re not using it all.
  2. Consider making some employees redundant, but be careful about hiring too many short-term consultants instead – as that can work out to be more expensive.
  3.  Negotiate with suppliers. Don’t be shy about asking for discounts, especially if you buy in bulk or place regular large orders and have a good payment history.

Be intelligent about where you cut costs

You might feel like you need to cut costs to the bone when debt looms over you, but sometimes it can be counter-productive. For example, consider the global economy. Some countries chose ‘austerity’ because of excessive debt – yet they suffered with more sluggish economies than those that tried government stimulus exercises (at least in the short term).

There are different schools of economic thought about this, but don’t assume cutting costs will automatically save you money. It’s where and how you cut costs that matters.

For example, if you slash your marketing budget you might save a lot of money in the short term, but you will lose potential new clients. Cut your shop floor space and you’ll save rent, but reduce the range of stock you can display to customers. Make some of your staff redundant, and you won’t be able to handle any larger contracts that come your way.

Cut when you need to, but do it sensibly. Before you start, use accounting software to forecast the financial impacts of different cost-cutting options. Trim the fat out of your business, not the muscle.

Raise funds to pay your debts

This will be difficult. A new business that’s free from debt is a better investment proposition than one that’s having financial problems. Still, you have choices:

  • Borrow from friends or family
    This can be awkward and could strain your relationships, but you may get favorable rates.
  • Liquidate assets
    Creditors are likely to accept this because they’ll want to be paid at least something, and this way they’ll get a better deal than if you went bankrupt. Their only other option might be litigation, and that’s timely and expensive.
  • Look for new investors
    Be aware that any new money will be expensive for you. Investors who might have wanted 5% of your new business in exchange for their money might want 30% now you’re in difficulties.

Read more about ways to finance your business in our guide.

Be realistic about your options

More than a third of business owners are less than comfortable about their levels of debt, so you’re not alone. Do everything you can to keep your business running, and talk to local business advisory agencies to see what help they can offer.

With luck and perseverance, you’ll be able to turn your business around. But if things don’t improve, you may have to consider closing your business and declaring bankruptcy. That would hurt, of course, but it doesn’t have to be the end of your dreams.

Many entrepreneurs fail in business at least once before finding a successful strategy. And as long as you learn from the experience, you may be able to bounce back stronger next time.

Contact Us

If you’re struggling to find a debt repayment plan that works or if you need help understanding your numbers, let’s chat. Through our CFO Program, we aim to provide you with accurate financial information to help you manage debt or grow your business. Book a free, no-obligation call below. 

cash flow management

Our Client Onboarding Experience

Our Client Onboarding Experience

We know it can be daunting switching to a new accountant. It might feel like a mammoth task so you just keep putting off. Kind of like making it to the gym to cancel your membership after not going for the last six months. This is why we made sure that our client onboarding experience is as convenient as possible.

Changing accountants doesn’t have to be hard. In fact, our onboarding process makes it seamless. We even contact your accountant to obtain all your information, so you can avoid any awkward conversations about why you’re leaving them.

We start with a complimentary meeting. This helps us get to know you and your business and make sure we’re the right fit for each other. We want to know your goals and how we can work together to ensure these are achieved. We want to ensure we have similar values and expectations. We want to show you how we can add value to your business to ensure you can achieve time, mind, and financial freedom.

After the meeting, if we both agree we’ll work well together, we’ll complete all the boring admin stuff. We’ll request your info from your accountant, iron out any historical creases, and ensure your books are up to date.

Next, we like to meet with our clients to develop their Business Plan. We don’t mean a 30-page plan we create and send to you to gather dust in the bottom drawer. Our Business Plans are succinct and dynamic to act as a decision-making tool for your business. We’ll help you set your goals for the year and break these down into 90-day goals and actions to ensure success. Not all clients choose to have a Business Plan, but our most successful clients have one – it’s best practice.

Then, the work begins. Depending on your selected service plan, this could be a Cashflow Management Coaching so you can plan for inflows and outflows, Tax Planning to ensure you put away enough money for tax, or ongoing Accountability Coaching so you stay on track to achieve your goals.

This is just a handful of the services we offer; we’ll work out your ideal service offering at our initial meeting. Along the way, we’ll keep in touch to review our performance and make sure we’re on track to achieve your goals.

On a side-note, our Quick Queries service means you can get in touch with a question at any time. If it can be raised and resolved within 10 minutes, there’s no charge.

After a year together, we’ll review your progress and celebrate your wins. We’ll also reset your key initiatives, and goals and redefine what success will look like for you in the coming year.

If this sounds like a bit of you, get in touch for your complimentary meeting or to find out more about our firm.

“Progress is impossible without change.” – George Bernard Shaw

The Top 6 Things Lenders Want to see in your Financial Reports before they will Lend you Money

The Top 6 Things Lenders Want to see in your Financial Reports before they will Lend you Money

Do you know that financial reports are key documents that enable lenders to make a decision about whether they lend your business money?

You are probably aware of the 5 C’s that lenders look at when they assess an individual’s credit worthiness, namely: character, capacity, capital, collateral and conditionsIn a similar way, lenders can tell from your business’ financial reports whether those criteria are met.

However, financial reports provide a lot deeper insight into assessing the risk the lender takes on when a business borrows money. So it stands to reason that if you want the best chance of borrowing success, then it pays to provide the lender with accurate, high quality information that is available in a timely manner.

It is also important to be prepared for the following questions:
  • How much do you want to borrow?
  • What time frame and how will it be repaid
  • What is an alternative way the loan could be repaid should the business fail
  • Is the loan application request reasonable in the circumstances

Like the 5 C’s of creditworthiness for an individual, there are 6 aspects to creditworthiness for a business that stem from financial reports. They are:

  1. Ratio Analysis
  2. Cash Flow
  3. Operation Risk Assessment
  4. Accuracy of Records
  5. Break Even Analysis
  6. Business Forecasting

The Ratio Analysis and what it reveals about your business

Well, actually there is more than one ratio. A lender may use four different ratios when assessing a lending application for a business.

  • The Working Capital Ratio.(which is Current Assets  / Current Liabilities) Working Capital represents a company’s ability to pay its current liabilities with its current assets. Working capital is an important measure of financial health since lenders can measure a company’s ability to pay off its debts within a year. Assessing the liquidity of a business, or how easily a company can convert assets into cash to pay its short term obligations, is crucial to the Working Capital Ratio. For example: if your company has assets of $10 million and liabilities of $5 million there is a straight forward ratio of 2:1 i.e. Current Assets / Current Liabilities. The lower the ratio, the longer it may take to pay back the lending or subject the borrower to undue stress on working capital.
  • The Quick Ratio or ‘Acid Test’ Ratio. (which is Current Assets-Inventory/ Current Liabilities) This ratio shows how well current liabilities are covered by cash and by items with a ready cash value. Inventory, on the other hand, takes time to sell and convert into liquid assets. This ratio subtracts inventories from current assets, before dividing that figure into liabilities. For example: if your company has assets of $10 million less $3 million in inventory and $5 million in current liabilities the ratio is 1.4:1. Ideally, you want to show a 1:1 ratio, but if your business has less than that it could mean that you turn your inventory over quickly in which case the lender may seek clarification.
  • The Debt-to-Equity Ratio. This ratio shows a potential lender if you are borrowing too much. The debt-to-equity (D/E) is calculated by adding outstanding long and short-term debt, and dividing it by the book value of shareholders’ equity. For example, your company has about $2 million worth of loans and has shareholders’ equity of $10 million. That works out to a modest ratio of 0.20, which is acceptable under most circumstances. However, like all other ratios, the metric has to be analysed in terms of industry norms and company-specific requirements.
  • The Return on Equity Ratio. This ratio determines how valuable a shareholders investment in a company is.  Return on equity is calculated by taking the company’s net earnings (after taxes), subtracting preferred dividends, and dividing the result by common equity dollars in the company. For example, if your company has net earnings of $1.5 million and preferred dividends are $500,000. Take that and divide it by the common equity of $8 million for arguments sake. That gives a ROE of 12.5%. The higher the ROE, the better the company is at generating profits.

The Importance of Cash Flow

You are probably aware that there are two forms of accounting that determine how cash flows within a business; accrual accounting and cash accounting.

Accrual accounting is used by most public companies and is the accounting method where revenue is reported as income when it’s earned rather than when the company receives payment. Expenses are also reported when incurred, even though no cash payments have been made.

Cash accounting is an accounting method in which payment receipts are recorded during the period they are received, and expenses are recorded in the period in which they are paid. Therefore, revenues and expenses are recorded when cash is received and paid, respectively.

From an accounting perspective, your company might be profitable, but if the receivables become past due or uncollected, your company could run into financial problems. Even profitable companies can fail to adequately manage their cash flow, which is why a cash flow statement is a critical tool for lenders to analyse.

How Operational Risk impacts a lender’s decision

Operational risk is the risk of loss resulting from ineffective or failed internal processes, people, systems, or external events that can disrupt the flow of business operations. The losses can be directly or indirectly financial.

Lenders view Operational risk as part of a potential chain reaction of events which may result in an organisational failure that can harm a company’s bottom line and reputation.

As part of this process, a lender may ask you to provide a summary of the following:

  • Any breaches of private data resulting from cybersecurity attacks that have occured
  • Technology risks tied to automation, robotics, and artificial intelligence
  • Business processes and control weaknesses
  • Physical events that can disrupt the business, such as natural disasters and health pandemics for example
  • Circumstances of Internal and external fraud

Why your business must have accurate Financial reports

Having  reports is critical for your business for a range of reasons, including preparing accounts, evaluating tax liabilities, decision making, planning, forecasting and borrowing money.

The many financial reports that must be prepared for your business, provide you with the information needed to establish your business strategy, make management decisions, and understand whether your business is facing a challenge or an opportunity.

Lenders rely on you as the business owner to provide them with accurate financial information. The documents they will request from you are:

  • Statement of Financial Position
  • Statement of Profit and Loss
  • Statement of Changes in Equity
  • Statement of Cash Flows
  • Statement of Balance Sheet
  • Any notes to the financial statements

In addition to the above, lenders may ask for supplementary information that gives a narrative to explain the businesses performance and financial position. Narrative may also be sought for information on business strategies, and prospects for future financial years.

The quality and accuracy of the information you provide a lender supports your case for funding. But not only that, it is a best practice standard to adhere to. And by following best practices, if the time comes that you want to exit your business then it makes the process of compiling your Selling Memorandum that much easier.

What is your Break-Even Analysis?

Break-even analysis involves calculating and examining the margin of safety for a business based on the revenues collected and associated costs. In other words, the analysis shows how many sales it takes to pay for the cost of doing business.

Let’s say that your fixed costs are $3.5 million and your gross margin is 55%. Divide the fixed costs by the gross-margin. This gives us a break-even point of $6.3 million. This determines that your minimum weekly sales requirement is $131,250, based on a 48 week sales funnel

How accurate is your Business Forecasting?

Like any forecast, business forecasting involves making informed views based on modelling.

In the case of a business, the forecasting will involve metrics, regardless of whether they reflect the specifics of a business, such as sales growth, or predictions for the economy as a whole.

Financial and operational decisions are made based on economic conditions and how the future looks taking into account a degree of uncertainty.

A lender may look at how accurate your past forecasting has been and whether you have used qualitative and/or quantitative methods to make your assumptions.

In Summary

So there you have it, 6 things a lender will look at before they will lend you money and how you can demonstrate your businesses creditworthiness.

  • Constantly monitor your financial ratios
  • Understand your cash flow and the impact it has on your business
  • Know your operational risk factors and how to mitigate them
  • Demonstrate Best Practice Standards by having up-to-date accurate information
  • Know your break even point
  • Use qualitative and quantitative methods in your forecasting

Get in touch

If you are confused by accounting and not confident that your financial records will stand up to the scrutiny of a lender, then get in contact with us today via email to organise a free no obligation chat. We will listen and then formulate the best strategies to help you achieve your goals. Alternatively, click on the Book A Call button now to get started.

The Obvious and Unexpected Benefits of Having a Personal Budget

The Obvious and Unexpected Benefits of Having a Personal Budget

Having a personal budget is essential to gaining control of your personal finances. Budgeting doesn’t necessarily mean restriction; it frees up your money, so you know exactly what’s available to spend.

The top 10 benefits of personal budgeting:

  1. Gives you control. Developing your personal budget gives you control over your money. You’ll know how much cash you’ll have coming in and can make a plan for how to spend it.
  2. Focuses you on your money goals. Everyone should have goals for their money. Whether this is paying off debt, increasing your savings, or freeing up more cash to invest in your business, a personal budget will keep you focused on achieving these goals.
  3. Creates awareness of where your money goes. Have you ever looked at your personal drawings from your business and thought ‘we can’t possibly have spent that much money last year!’? You’re not alone. So many people really have no idea what they spend their money on.
  4. Builds better money habits. Reviewing your actual results against your budget each month will encourage you to think about your spending before you spend.
  5. Helps manage debt levels. You’ll be able to plan for unexpected expenses instead of obtaining debt to pay for emergencies. You’ll also be able to allocate more money to debt repayments to become debt free faster.
  6. Helps you achieve your wealth goals. Wealth goals are your long-term financial goals; saving for retirement or major life events. Because these are long-term, you need to start planning the steps to achieve your wealth goals now.
  7. Provides an early warning system. By regularly monitoring your spending, you’ll quickly identify upcoming costs and adjust your spending if required.
  8. Aids communication. Spending time developing your personal budget with your spouse will ensure you’re aligned with your spending plan.
  9. Provides you with more money. If you have a personal budget and stick to it, you’ll end up with more money at the end of the year than you would’ve had without a budget.
  10. Ultimately, it gives you a better life. Not only will you end up with more money, you’ll likely have less conflict and stress over money.

Personal budgeting doesn’t have to be a time-consuming process. Dedicating 1-2 hours a month to budgeting will result in a huge improvement; not only to your bank account, but to your stress levels too.

“A budget is telling your money where to go instead of wondering where it went.” – Dave Ramsay

Contact us if you need help developing your personal budget!

Need a boost? Download a personal budgeting template here.

You might also find our Financial Awareness Coaching and Cashflow Management Coaching relevant and helpful.

Cashflow and Cost Control

Cashflow and Cost Control

More than ever, cashflow and cost control is a vital part of staying afloat, whether your business is in recovery or growth mode.

Revenue, profit and your bottom line will all resume their importance when we’re back to “normal” (however that’s going to look), but keeping everything running is the priority for now.

Regular cashflow forecasts will help you keep that in focus. Here’s why:

  • Cost control – If you can’t reach your targets for income, reining in your costs may give you a little extra head room to manage cashflow while you plan your next move.
  • Visibility on outgoings – Cost control can be a challenge when it’s hard to pinpoint hidden costs or where established ways of doing things cost more money than they should. You may also have been coping with unexpected expenses, as you’ve adapted your business for unplanned circumstances.
  • Improving business practice – It’s more than just keeping an eye on outgoings (though that’s important). It’s about looking at each aspect of your business and business systems (or the gaps where there should be business systems) to see if poor practice is driving costs up unnecessarily.
  • It can be useful to break it down – You can look at cost centres such as office supplies or freight. Or you can look at what those costs do for your business.

It can help to analyse costs in terms of cost of sale and overheads.

Cost of sale and overheads

Cost of sale (also known as Cost of Goods Sold or CoGS) is how much it costs you to make a sale. In a business which sells products, CoGS is based on the price paid for the product, plus any costs necessary to put the merchandise into inventory and make it ready for sale, including shipping and handling. You can even break it down to calculate the cost of sale of individual units.

Overheads are general business expenses. They can’t be tracked directly to sales. Overheads are what it costs you to open your doors (whether online or actual) every morning.

What’s your plan? | Cashflow and Cost Control

  • Reduce unnecessary expenses – Now might be the time to trim every expense that’s not related to your core product or service.
  • Suppliers – Are you able to work with your providers to ask for discounts or more favourable payment terms on either cost of sale or overhead expenses?
  • Talk to the team – Analyse your costs and involve your team, including frontline sales staff.
  • Advertising – It might be a false economy to cut back on advertising, as customers are online looking for bargains and price-checking alternatives. Targeted campaigns might work better.
  • Prioritise – Can you pinpoint the products most likely to bring the fastest or best return and hold back on products that are a slower sell?
  • Promote or discount – If you have old or slow-moving stock, can you discount it and convert old stock to cash? If you can attract customers now, you may be able to use it to spotlight your other products.

Every dollar you can pull back from your costs can go straight into cashflow.

Talk to us if you’d like to review your costs and your systems to keep costs under control. Whether your sales are boom or bust, you want to make sure that your costs aren’t holding you back.

Read on how to build a best practice business through planning – click here.

Weekly Digest – 24 September 2021 | Business Support and Advisory

Weekly Digest – 24 September 2021 | Business Support and Advisory

Welcome back to our Weekly Digest. Read on for business support and advisory, plus the latest updates and some ideas to help us all move forward.

Auckland Moves to Alert Level 3 | Business Support and Advisory

Auckland has moved out of Alert Level 4 lockdown, but could remain in Alert Level 3 for months, according to experts. Prime Minister Jacinda Ardern believes the outbreak can still be controlled under control under Level 3 as long as people stick to their bubbles.

Also, the PM believes that the country has the potential to hit the 90% vaccination mark over the next couple of weeks– just in time for people to enjoy more freedoms over Christmas.

Increased Fines for COVID-19 Rule Breakers

Last Friday, the government announced higher fines for those breaching COVID-19 restrictions amid concerns that the outbreak may spread beyond Auckland.

Intentionally failing to comply with rules such as travelling without permission will be a criminal offence and is now liable on conviction for a fine of up to $12,000 (previously $4,000) or 6 months imprisonment. Fines for companies can go up to $15,000.

On-the-spot fines for infringement offences like failing to wear a mask where it is mandatory will also be increased from $300 to now $4,000. These changes will be implemented in November, subject to the passing of the COVID-19 Public Health Response Amendment Bill.

Economy Surges in Q2

The country’s economy grew at a much faster pace than expected in the second quarter, as GDP surged 2.8% in the three months through June, according to the latest data by Statistics New Zealand. This figure beats the Reserve Bank of New Zealand’s estimate of 0.7% and the Reuters poll forecast of a 1.3% increase.

This improvement in the economy reinforces views that the central bank may start lifting interest rates despite the recent COVID-19 outbreak.

COVID Support for Businesses Amid Level 4 Lockdown

Businesses impacted financially by this lockdown are being offered a range of support measures. You can find information on the COVID-19 website detailing the support available, or there’s a recap below.

If your business has to close temporarily or reduce opening hours

COVID-19 Wage Subsidy

If your business could not operate at Alert Level 4 restrictions or you lost revenue, you can apply for the COVID-19 Wage Subsidy scheme to help keep paying your staff and protect jobs. Your opportunity to apply closes on 30 September.

Wage Subsidy 2021 #2 Update

The Wage Subsidy currently only applies to those businesses operating under Level 4 or Level 3 restrictions. This means generally anyone outside of the Auckland borders cannot and should not apply for this round of Wage Subsidy (at this stage).
If you have applied and received the subsidy (done before the move to Level 2) then you will need to consider and ensure that

  1. your revenue does in fact drop by 40% for the 2 weeks from 31 August to 13 September and
  2. it is attributable to the time spent at level 3 and/or any direct knock-on effect of Auckland remaining at level 4.

Get in touch with us if you have any questions.

Find out more about the Leave Support Scheme on the Work and Income website.

COVID-19 Resurgence Support Payment

The COVID-19 Resurgence Support Payment helps cover wages and fixed costs for businesses who have been directly affected when there is an increase to Alert Level 2 or higher for a week or more.

To be eligible, your business must have experienced at least a 30% drop in revenue or a 30% decline in capital-raising ability over a 7-day period, due to an increase in Alert Levels.

You can receive $1,500 per business plus $400 per full-time employee (FTE), up to 50 FTE.
The maximum payment is $21,500.

If you’re a sole trader, you can receive a payment of up to $1,900.

Applications for the COVID-19 Resurgence Support Payment are now open. You need to apply through Inland Revenue. Businesses anywhere in New Zealand can apply if they meet the eligibility criteria.

Find out more information about the COVID-19 Resurgence Support Payment and how to apply here.

If your business has reduced revenue

Small Business Cashflow Loan Scheme

If you employ 50 or fewer staff, you may be able to apply for the Small Business Cashflow Loan Scheme. This is a one-off 5 year loan where you can borrow a maximum of $10,000 plus $1,800 per full-time-equivalent employee within your business.

  • When applying for the loan, you need to be able to declare that your business is viable.
  • Your business must have experienced a minimum 30% decline in actual or predicted revenue over the period of a month, compared with the same month last year.
  • Applications are open until 31 December 2023 through myIR. If your business does not have a myIR account, you will need to create one to apply.

Loans will be interest free if they are paid back within 2 years. The interest rate is 3% for a maximum term of 5 years.

IRD tax assistance

If you’re finding it hard to meet your tax obligations, Inland Revenue may be able to help. Get in touch with us if you have any questions.

Insolvency relief

The COVID-19 Business Debt Hibernation scheme allows businesses to get a month’s protection while they talk to their creditors.

If an employee needs to self isolate

COVID-19 Leave Support Scheme

If an employee cannot work from home while self-isolating, you may be able to apply for financial support so they can continue to get paid.

The Leave Support Scheme is paid as a 2 week lump sum at the rate of:

  • $600 a week for full-time employees
  • $359 a week for part-time employees

You cannot get the Wage Subsidy August 2021, Leave Support Scheme and Short-Term Absence Payment for the same employee at the same time.

If an employee is awaiting the result of a COVID-19 rest

COVID-19 Short-Term Absence Payment

The Short-Term Absence Payment is available for businesses, including self-employed people, to help pay employees who cannot work from home while they wait at home for a COVID-19 test result. This is a one-off payment of $350. You can find the details here

Kiwi Business Boost Tool

The Government has funded specialist consultancy support services to provide advice to businesses who need it. You can use the Kiwi Business Boost Tool to find out what services are available in your region.

The Treasury website’s COVID-19 Economic Response Measures can also provide more information on the range of supports available to businesses.

Business Support and Advisory

Your most precious resource is your time. So if you want to find more ways to save time and focus on building a thriving business, get in touch with our advisors today!

Check our latest article on How to be Cashflow Confident – click here.

How to be Cash Flow Confident – A Case Study

How to be Cash Flow Confident – A Case Study

Do you know that cash flow is not the same as profit? 

Let’s face it, accounting can be confusing at the best of times. That’s why it is important for you as the business owner, to understand the key financial ratios, reports and also, how to forecast cash flow. After all, how can you improve your profit if you don’t have a handle on cash flow and the numbers behind it.

Cash flow is the lifeline of your business. Without consistent, solid flowing cash flow, you will be constantly chasing your tail in managing income vs. expenses. You will have trouble setting aside funds for working capital, you will experience a reduced ability to borrow, and your business will struggle to grow.

Understanding the true costs of running a business and the factors influencing cash flow and profit 

We recently advised a wholesale business that was experiencing large fluctuations in its sales, profits and cash flow. The business supplies goods to rural businesses and carries a large amount of stock and has significant credit accounts with its customers.

Recent Covid-19 events resulted in significant stock write-offs. The owners, Daniel & Tracy, wanted advice on how to improve their profit, better manage their cash flow and prevent the loss of income from future unplanned events.

However, there were some key issues the clients had to solve. To begin with, they did not know what their break even sales level was. They did not understand the benefits of ratio analysis and budgeting. They lacked working capital and they had inadequate business insurance.

Combined with these issues, Daniel & Tracy wanted to sell the business and retire within 12-months. In order to get the value they wanted from a potential purchaser, they needed to sort these things out.

Here’s how we resolved the issues for them

  • Breakeven Sales 

The first step was to establish the breakeven sales point so that they would know exactly what they had to bring in each week in terms of sales to break even. 

To achieve this, we reviewed their fixed costs which when totalled, came to $350,000.

Then, we reviewed their gross profit margin on all products and determined an average of 55%.

This determined that our minimum weekly sales required was $12,250.

  • Improving Profit 

To better manage their stock, we completed a series of key profit ratio calculations with Daniel and Tracy. This included Gross Margin Return on Inventory and Gross Profit Margin. We suggested to Daniel and Tracy that they upgrade their stock management system to improve their gross profit margin and to reduce shrinkage.

  • Improving Cash Flow

In order their improve cash flow, we completed a series of cash flow ratio calculations. This included Accounts Receivable, Stock Turnover and a Funds Statement. It was agreed that Daniel and Tracy would prepare a cash flow budget every six months to determine their funding requirements, until such time as they sold the business.

  • Improving Funding 

We were able to negotiate an extension on Daniel and Tracy’s business overdraft limit to meet their working capital requirements. Note: this would not have been possible without determining their key financial ratios and producing the cash flow reports to show the lender.

  • Improving Insurance Coverage 

Daniel and Tracy were woefully under insured and this oversight had cost them dearly. We analysed their coverage and determined that they were without Business Disruption Insurance. We promptly organised the appropriate cover to prevent the business from a loss of future income. 

 As you can see from our case study, there is a lot to be mindful of in being cash flow confident. 

Daniel and Tracy saw an immediate improvement in their cash flow position as a result of the recommendations we made. Fortunately for them they listen to our advice and have gone one to achieve their business goals and succession objectives.

Get in touch

If you are confused by accounting and not confident about your cash flow management, or feel like your finances are getting out of control then get in contact with us today via email to organise a free no obligation chat. We will listen and then formulate the best strategies to help you achieve your goals. Alternatively, click on the Book A Call button now to get started.