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Thread: Basic business principles - Profit shows direction, but cashflow can kill.

  1. #11
    just me duncan drennan's Avatar
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    Quote Originally Posted by Dave A View Post
    Which about sums up my dilemma - time invested vs improved understanding vs other demands. But that be life
    The great entrepreneurial conundrum
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  2. #12
    Platinum Member Marq's Avatar
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    Unfortunately my - Other Demands at moment > Time available < Need to help get this in place. Might see a gap next next week only.

    Will have a go at looking for software (there must be stuff out there already) or build model (if we cannot find) - as soon as my schedule slackens (doubtful given that we are about to go into mad season time.)

  3. #13
    Site Caretaker Dave A's Avatar
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    At the moment my theory is that the world has gone just a little mad.

    We're either running around like lunatics so that we can get everything finished before the festive season "shutdown", or we're running around like lunatics preparing for the festive season rush.

    Keeping my staff's eye on the ball is proving a little tricky right now. I think I've got more disciplinaries lined up this week than I've had for the rest of the year. Yo ho ho

    Heck, if we tackle it once the lunacy has subsided a bit - no biggie I reckon. I think it's something that will evolve anyway. Not looking for an overnight solution.

  4. #14
    Silver Member Candy Bouwer's Avatar
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  5. #15
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    Financial Planning Tool

    Hi Dave

    Contact me and I will forward you a generic financial business planning tool in Excel that, if acceptable, you are welcome to make available for download to whoever may require it. Nothing fancy, but it should do the job.

    Reports covered:
    - Income statement
    - Balance sheet
    - Cash flow
    - Capital expenditure
    - Detail of accounts (fixed assets, stock, debtors, creditors, bank, etc)

    Periods covered:
    - Year 1 (12 months)
    - Year 2 (4 quarters)
    - Year 3 (full year)
    - Year 4 (full year)
    - Year 5 (full year)

    Contact me in case you require formulae to be changed.

    Trust it will be useful.

    ProValue

  6. #16
    Site Caretaker Dave A's Avatar
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    Thank you for the offer on two fronts, ProValue:

    For the spreadsheets offer
    For reminding me of this idea

    I've PM'd details for the info.

  7. #17
    Silver Member Vincent's Avatar
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    Turnover is vanity, Profit is sanity and Cash is reality
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  8. #18
    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by Vincent View Post
    Turnover is vanity, Profit is sanity and Cash is reality
    Nice one.

    BTW - here is the spreadsheet from ProValue - a big thank you there.

    A warning - it is about 1.2 MB - right click the link below and select save target as

    Financial spreadsheet from ProValue
    Last edited by Dave A; 15-Sep-13 at 07:54 AM. Reason: updated URL

  9. #19
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    The problem of financing a business in the up phase, always has this impact on cash flow, and only varies dependant on the nature of the business. I remember the first business I worked for, which was a Ship Chandler. They purchased locally on 30 days terms and got paid by overseas shipping lines at 90 or even 120 days.

    However there are a number of factors which can be controlled, which just adds to the complexity of the cash flow model. (may be covered in download, whcih a did not download - need to save my band width)

    Reduce your debtor terms. Offer discounts, tighter control, material on site on 30 days terms , labour at 60 day terms, and make sure your system are 100% so as not to provide any excuse for delaying payment.

    Reduce your stock turn over or better planning of material deliveries. Better control over the timing of deliver and invoicing of materials and increase frequency of deliveries. i.e. target to invoice materials in the same month they were received. Failing which the difference between payment and receipt will not be 30 days, as shown in the discussion, but 60 days.

    Request extended terms from creditors.

    Having maintained a good payment record with suppliers, and good relationships with your bank manager and your customers, will help when it comes to advising them of where your business is going and asking for increased overdraft facilities or more favourable terms. If you do not ask you will not get. 30 day terms are not a problem to a major supplier if they know you are a good credit risk.

    Consider taking Credit Insurance on your book. It is a good risk insurance, especially if the 80:20 rules applies. 80% of turn over is represented by 20% of the customers on the book or worse.

    While on the subject, what if 80% of turnover comes from one customer, and they decide to change from you to another supplier after a 20 year track history. Do not put yourself in this situation. Find other customers even at lower margins. I would not be able to sleep at night if I was involved in a situation like this. Can you believe this really did happen and who suffers...the staff who are being retrenched.

    Lesson: Never under estimate your competition and never assume customer loyalty, no matter how good your service or quality is. .... price is king.

    But for business owners to have an appreciation for the impact of increased turnover on theirs business, Budgets and Business Plans are essential to create an understanding of the relationship between various events, so that when or even before the impact takes place, the effect is anticipated.

    And lastly avoid the temptation to spend. Build reserves to finance future growth.

  10. #20
    just me duncan drennan's Avatar
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    Quote Originally Posted by Ryss View Post
    And lastly avoid the temptation to spend. Build reserves to finance future growth.
    Hear, hear! I'll second that one.
    [SIGPIC]Engineer Simplicity[/SIGPIC]
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