Cash is King
Anyone who has been in business for any length of time will tell you that 'Cash is king'. Cash flow in your business will be one of the things you are going to have to watch like a hawk. Most businesses that fail don't do so because they have no sales, they do so because they have no cash.
Managing your money is probably one of the least exciting parts of running your own business for most people. But, whether you are creating a few greetings cards or setting up a chain of convenience stores you will need to record your ins and outs and also have a close eye on making sure that there are more ins than outs.
Managing your cash flow doesn't have to be complicated. Most people are frightened with the thought of it but once it becomes a part of managing your business it loses its teeth.
Effective businesses plan their cash flow. They budget their income and expenditure based on what they are aiming for in terms of sales and hence the cost of sales, in other word what it costs you to make your idea work.
Budgeting is an essential pre-requisite to your business as it helps you to work out how realistic or not your ideas are. It can also be quite motivating when you see a significant plus figure in the end column of your cash flow projection. On the other side of the coin, when you see a negative figure it certainly focuses your thinking on how to flip it around.
Every plan is by definition inaccurate. The result of your budgeting process and cash flow projections give you at best a fair picture of where you need to get to. The benefit however, is not in the plan but in the process of figuring it all out. Doing the process is what helps you to get to know your business, its limitations, its potential and helps you to spot ways in which you can limit your expenditure and maximise your profit.
There are many software packages you can buy off the shelf to help you manage your finances. If you are a smaller business you might not want to invest £40 or more on something like this so we've developed a simpler solution which will do exactly what you need it to do, but it's completely FREE.
The attachment below is something we have used successfully within the Megacentre for around 3 years. It not only allows us to budget and plan cash flow at the start of the year, it allows us to record all the income and expenditure and automatically compares our plans with the actual performance of our budget or project. It's very easy to use but if you have any questions email us and we'll help you out.
CASHFLOW & BUDGETING PLANNER (.xls spreadsheet)
NOTE: Some of the the fields on this spreadsheet are locked so that the formulas which make the sheet work cannot be deleted. The password to change these details is 'wealthcreation'. If you need any help on how to use the spreadsheet simply email us.
Colin Davies is the Business Director at The Megacentre.