Cash flow and financial planning Archives | Numbers Knowhow

Manage Cashflow: Five Top Tips

Mahmood Reza — Mon, 21 Aug 2023 09:04:28 +0000

Wondering how to manage your cashflow? You’ve come to the right place. By the end of this blog, you’ll have read about top tips to manage your cashflow and you will be equipped with the necessary information to help you do a really good job at it. Cash and business But firstly, what is cash? It’s what gets paid into your bank account. It’s factual, and more importantly, is the lifeblood of your business. Secondly, why do we need cash? Your business needs it for a whole bunch of things. Typically, cash is needed for: So running out of cash, access to cash or poor cash flow is squeaky bum time. Your business will survive if your cash flow supports it. However, if you do a bad job at managing your cashflow, the cash will run out, or access to it will dry up. Unfortunately, it is the end of the business road if you reach that point. It’s not for nothing that the phrase “Revenue is vanity, profit is sanity, and cash is reality”, rings true. It’s good business practice to have a good cash flow management strategy. Here are the five key elements that you should include […]

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What Is Turnover In Business?

Mahmood Reza — Sun, 06 Aug 2023 15:07:27 +0000

What is turnover in business? We’re here to answer that question for you. If you’ve been looking to get a grasp of what turnover is, then it certainly doesn’t help that there are different terms for it. As a result, you’re left wondering what they mean when they use all that jargon. By the end of this blog, we will clear all of that confusion. So, without further delay, here’s what this short blog (and vlog) covers: What is turnover in business (aka definition) To begin with, it is the standard term used by UK limited companies and when accounts are filed. HMRC use it in for the self-employed, large and small, and also for partnerships, large and small. Turnover also comes up for the Fifth Self Employed Grant. First thing is first. Let’s define it. What is turnover in business? It’s the amount of money received from sales for a given period of time. I know it doesn’t help that there are different terms for turnover – revenue, sales, and takings – but don’t worry, they all refer to the same thing. So, whenever you hear people talking about the company sales or revenue, they’re essentially talking about their […]

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The Difference Between Budget & Budgeting – A Beginner’s Guide

Mahmood Reza — Fri, 19 May 2023 09:16:58 +0000

We’re all on a budget, and I bet we’ve all done budgeting in one way or another. But, before we go into comparing the two, we need to clarify what a budget is. What is a budget? It’s really a plan for spending the money you have or the money you expect to have over a certain period. When it comes to businesses, it’s usually an annual one. When we say that something is in our budget, we actually mean that we have the necessary funds and we can spend them on whatever it is we’ve planned for our business. On the other hand, if it is over it, it means that we’ve not planned for such an expense, and we can’t afford to make a certain purchase. Types of spending plans They can be personal or corporate. This means that both households and companies use them. Hence, the very first sentence of this blog. Personal When you know how much money you have and what portion of it you spend on all your monthly expenses, it will be much easier to stay on top of your finances. These calculations are usually done on a monthly basis. Following a […]

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Cash Flow Mastery For Business Growth

Mahmood Reza — Fri, 19 May 2023 09:13:01 +0000

Cash flow or fail! Because money talks. And it is especially talkative when you don’t have any, nagging money worries that keep people up all night and worried all day. Most of us have been broke at some point in our lives. Most people will have had to adopt certain strategies or habits to ensure they get their finances back on track. And that is without us even considering the complex landscape of the business world. Cash flow – a brief overview Cash flow is the money that flows in and out of a business over a given period of time. It is important because it allows you to stay in business. How does it do that? Money coming is used for many purposes. You use it to pay your bills, salaries, rent, etc. It also allows for catering to unexpected expenses such as equipment failure, or natural disasters. Another thing that it is vital in is growth investments. Without cash flow, your business may miss out on investment opportunities, preventing it from reaching its targets. A positive cash flow allows a business to operate smoothly, invest in growth opportunities, and stay resilient when unexpected challenges arise. You need […]

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Decision Making Under Uncertainty

Mahmood Reza — Fri, 14 Apr 2023 09:10:10 +0000

Decision making when things are calm is not the same as decision making under uncertainty. Because when it’s business as usual, you pretty much just follow the strategy laid out in your business plan, and take action that you’ve planned out beforehand. But let’s face it, although every business goes through periods when things are running like clockwork, there will certainly be times that will be challenging. This, by the way, is part an parcel of running a business. And the challenges will come in different shapes and sizes. For example, not knowing if we’re going to keep certain clients, changes in costs due to prices going up, etc. It is those things that will take unpredictability or uncertainty a notch higher. As a result, we will feel the anxiety kicking in. However, regardless of the situation, in business it’s essential to make decisions quickly and efficiently. In this video, I go through the steps you need to take to make rational decisions when everything is going crazy around you. Here’s a summary of them: Stay calm, or become calmer Going back to the anxiety I mentioned above, it is vital to try to stay as calm as possible. […]

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Cashflow Forecast Guide

Mahmood Reza — Tue, 11 Apr 2023 10:46:34 +0000

Building your cashflow forecast might seem unnecessary to some – at a first glance, that is. That’s why, this cashflow forecast guide aims to explain why you need one and how to build it. Because, you might be thinking, “I don’t need one of those. I’m not going out of business!” But if you’re like most people, your business is constantly changing and growing. And when it does change or grow, that’s the perfect time for a new forecast! It doesn’t matter what kind of business you have – retail store, restaurant, consulting firm – forecasts are important because they help keep your finances in order and on track. Why you need a cashflow forecast This cashflow forecast guide undoubtedly needs to start with the reasons why a cashflow forecast is your greatest ally. Firstly, it will help you make sure that everything is running smoothly with your money. If something happens unexpectedly (like an unexpected expense), then at least you’ll know about it ahead of time so that you can plan accordingly. Forecasts also give businesses a chance to see where their money is coming from and where it’s going; this helps them figure out ways to make […]

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Cashflow Forecast DIY (with Microsoft Excel)

Mahmood Reza — Tue, 11 Apr 2023 10:38:06 +0000

A DIY cashflow forecast in Microsoft Excel. Sound interesting? Then read on: Perhaps not because you aren’t as comfortable dealing with numbers. But, this blog (and vlog) is here to show you that it isn’t scary at all. Especially when someone guides you every step of the way. So, if you want to learn how to create one such document containing your cashflow forecast, you’ve come to the right place. Let me start by saying that making your own cashflow forecast is easy with Microsoft Excel. You can use it for any business, big or small. And feel more at ease because you’ll be able to see where your business is heading. If you’re using Google Sheets or anything equivalent, then don’t worry! The principles, approaches and formulae will apply as equally with those other packages. I’ll show you how to build a budget from scratch by using the building block approach. We’ll also deal with sales taxes, loans and credit. What’s more, you’ll save time in the process! It’s a common problem for small businesses not to know how much money they’re going to make i.e. not have a cashflow forecast. This can be stressful, and it might […]

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Undercapitalization In Business

Mahmood Reza — Tue, 11 Apr 2023 10:35:48 +0000

How to avoid undercapitalization and what it is, is the topic of this video and blog. It’s when the company hits a financial brick wall. But, let’s take a more step-by-step approach and explain everything so it’s easy to understand. In this blog (and vlog), you will find out the following: Undercapitalization To put it simply, it’s when a company runs out of money. The term describes a state in which a company does not have enough capital to perform its day-to-day business operations. In other words, it is a shortage of funds for the business which, in turn, cannot afford to cover what it spends. What’s more, it may also lead to the company being unable to pay its creditors. If you’re keen on watching videos, then click on it to learn something useful which could save your company from making some common mistakes and risk undercapitalization. If not, then scroll down and continue reading the blog. Why does undercapitalization happen? The reason why so many small businesses fail due to this issue is because they have a false sense of security in their own abilities. They think that because they are a good worker or a good […]

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How To Judge Your Financial Performance

Mahmood Reza — Tue, 11 Apr 2023 08:59:07 +0000

How do you assess financial performance? It’s not that straightforward, isn’t it? Knowing how to judge your financial performance can be tricky. It’s because many factors come into play. Plus, it’s not always easy to know where you stand. You can get a good idea of how you’re doing if you turn to your numbers – more specifically, your income and expenses. Take a careful look at them, and it should be much clearer where your business is at the given time. In the words of Dietrich Bonhoeffer, “Action springs not from thought, but from a readiness for responsibility.” So, to be able to lead your company to a brighter tomorrow, you need to be informed about the facts, take responsibility for the current situation and plan away based on reasonable data. Care for some tips to get you started? Read on to learn more. Know your income and expenses If you’re running your own business, it’s important to keep on top of your financial performance so you can make sure you’re making a profit. But how do you know if you’re doing well or not? Here are a few tips on how to judge your financial performance. Regardless […]

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How To Make Financial Projections

Mahmood Reza — Tue, 11 Apr 2023 08:41:08 +0000

Do you want to find out how to make financial projections and how to do it realistically? Here’s an easy-to-understand guide about making financial projections. A financial projection – meaning A financial projection is a forecast of the revenue and expenses that you expect for your business for a given period of time in the future. It usually contains predictions of several outcomes within. So, you can make a projection for your business in the case of sales or certain costs increasing/decreasing. In a sense, it gives you a plan B, and C… It doesn’t necessarily mean that it will pan out. Despite lacking accuracy, as it is a projection, it’s still a necessary part of business planning and development that you need to do each year. The reason being that it helps tremendously to set your business on the right path. And what it also does is it prepares you for the future. So, how do you actually make financial projections for your business? Let’s have a look. Part 1: Forecast sales What’s probably the most exciting part of it is projecting your sales. This is usually the first step in the process, too. Forecasting sales for existing […]

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Business Taxes in Financial Planning

Mahmood Reza — Sun, 25 Dec 2022 17:00:48 +0000

Handling business taxes in financial planning is a daunting task for many small businesses. It’s easy to get overwhelmed when it comes to taxes. However understanding the basics helps you make the best decisions for your business. Let’s take a look at some of the key points around tax planning and how you can use them to get ahead. Identifying Taxes Firstly, dealing with business taxes in planning is about identifying which taxes apply to your business. Understanding exactly which taxes your business is responsible for will help you stay on top of them. Furthermore, it saves money by taking advantage of deductions or credits that may be available. Factoring In and using Tax Rates Once you understand which taxes apply to your business, the next step is factoring in the applicable tax rates so that you can plan accordingly. This includes income taxes, capital gains taxes, payroll taxes, sales or use taxes (if applicable), property or real estate transfer taxes, as well as any other special or local taxes relevant to your business. Knowing these rates will allow you to calculate how much tax liability your business will have each year and adjust accordingly if necessary. Timing […]

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Understanding Operational Gearing

Mahmood Reza — Sun, 02 Oct 2022 16:27:35 +0000

Understanding operational gearing: Operational gearing is a term used to explain an important relationship between the two different types of costs of a business – fixed and variable costs. And because any business needs to have a good grasp of their finances (the money coming in and the money going out) you’re probably guessing by now that you definitely need to know about operational gearing and how it affects your business. So, operational gearing (or also operating leverage) is about the way that a business spends its money. It’s the proportion of fixed costs and variable costs. Companies that have higher fixed than variable costs are highly operationally geared companies. The bigger the discrepancy, the more highly geared the company is. On the other hand, if a company’s costs are predominantly variable, we say that it’s low operationally geared. Why is it necessary to know which type of costs are dominant for your company, you might wonder? Here are two main reasons: 1. Business risk Risk is a big and scary word. But the reality is that every company faces it, and it’s better to be prepared than caught off-guard. It’s an important aspect for business owners […]

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