The value of cashflow forecasting during a crisis

The value of cashflow forecasting during a crisis

During the ongoing coronavirus crisis, many sectors are seeing income either disappear completely or drop to dangerous levels. To be able to navigate the future path of your cashflow, you need to start forecasting – so you can map out your financial position over the coming months and can take the appropriate action to safeguard your cash position.

Forecasting your future cash pipeline

Projecting your cashflow pipeline forwards during a crisis is vital. Having access to detailed forecasts helps you to scenario-plan, search for cost-savings and look for strategies that will preserve your cashflow position.

Remaining in control of the cash coming into (and going out of) the business is the real focus, so you can accurately predict your financial position and can resolve any issues.

Key ways to get more from your forecasting

  • Run regular forecasts – The financial landscape is changing on a daily basis at present. A cashflow forecast is not a document that remains static. Variables and external drivers are literally changing each day, so it’s vital that you run frequent forecasts and react swiftly to any projected cash issues as they become apparent.
  • Use the latest cashflow forecasting apps – cashflow forecasting apps, like Fluidly, Float, or Futrli, integrate with your Xero accounts, giving a drilled-down view of how your cash inflows and outflows will pan out over the coming months – information that will inform and justify the decisions you make during these extremely challenging times.
  • Explore the right revenue streams – most sectors will have seen their face-to-face sales drop to absolute zero since quarantine restrictions came into place. To overcome this, there’s a real imperative to explore revenue streams and new opportunities for income. An example of this is coffee shops that now sell roasted beans online (this will depend on lockdown restrictions). The idea is to find ways to increase the money that’s coming in the door and balance out your unavoidable expenses.
  • Get proactive with cost-cutting – if you can reduce cash outflows to a minimum, that will have a real impact on the health of your future cashflow. Pare back your operations and aim to reduce things like unnecessary software subscriptions, or over-ordering of basic supplies. Negotiating cheaper rates with suppliers, if possible, will also help.
  • Review your staffing needs – now’s not the time to make anyone redundant, but you can look at ways to reduce the costs of staffing and resourcing. Reducing working hours or redeploying staff in different roles are all options that reduce payroll costs, while also looking after your staff’s welfare.
  • Run a variety of scenarios – changing the financial drivers in your forecast model allows you to scenario-plan different strategies and options. Many of these will be in a long-term plan when restrictions ease. Scenario-planning lets you answer questions and will give you some hard evidence on which to base your decision-making and strategic outlook over the coming months.
  • Look at various ways to access funding – if forecasts show a giant cashflow hole coming up, you’re going to need additional funding to get through this crisis. We can assist your business to investigate funding opportunities from grants, banks, loan providers, alternative lenders and crowd-sourcing funders.

Talk to us about setting up cashflow forecasting

Forceasting is an important step to give you the business intelligence to support your decision making.

Get in touch to improve your control over cashflow.

The wage subsidy for NZ employers

The wage subsidy for NZ employers

The Government’s wage subsidy is available for all employers that are significantly impacted by COVID-19 and are struggling to retain employees as a result.

The main details of the wage subsidy are as follows but there are still details being worked out. We will keep you updated.

Wage subsidy

The 12 week wage subsidy applies to NZ businesses that are significantly affected by COVID-19, and the recent measures to control it. This includes:

  • Existing businesses
  • sole traders
  • self-employed
  • registered charities
  • non-government organisations
  • incorporated societies
  • New businesses less than a year old.

Are all employers eligible to apply?

  • Businesses must be registered and operating in New Zealand.
  • Employees must be legally working in New Zealand.
  • Your business must show a 30% decline in revenue over a month compared to the same period last year. For new businesses this would be a ‘similar period’.
  • The wage subsidy applies to employees who can no longer work, it is not for staff who can work from home.
  • You must make best efforts to retain employees and pay them a minimum of 80% of their normal income for the subsidised period.

How much is the subsidy?

  • Full Time employee (20 hours of more) – $585.80 per week
  • Part time employee (less than 20 hrs) – $350.00 per week

The payment will be made as a lump sum for a period covering 12 weeks per employee. Which equates to $7,029.60 for a full time employee and $4,200 for a part time employee.

The Government now has removed the cap of $150,000 per business. (If you have already applied you do not need to reapply).

The payment is exempt from GST exclusive for employers. However it is subject to the usual PAYE, Student Loan, KiwiSaver deductions for employees.

The subsidy is for wages only, to help keep staff employed and also aims to help ensure your business viability.

To apply you’ll need your IRD number, business number, name and address, the names of your employees, and your employer IRD numbers, contact details for your employees and your business.

These are tough times for businesses. Don’t do it on your own. We are here to help you navigate the coming months.

Looking to improve business performance?

Looking to improve business performance?

Here are ten ways to make sure that you continue to drive through each business quarter with purpose, vision and the courage to super-charge your business.

1. Eliminate distractions: Time is the scarcest resource and biggest killer for most businesses. When we get busy we can also get distracted and focus too much time and energy on the wrong things. Be brave – slash standard meeting times, reduce unnecessary admin and delegate roles and responsibilities.

2. Say goodbye to bad customers: If possible in your business, get rid of ten time-wasters, bad payers, or customers who cause you pain. You will feel instant relief and spend your time better elsewhere.

3. Invest More: Having freed up time and headspace from deploying points one and two above, make sure you ring-fence time, key people, and money for some of the initiatives below. Redeploy with passion!

4. Get a Plan: You don’t go on a journey without a map or any idea of where you’re headed – so why fly blind with your business? Have a planning process, create a kick-arse plan – and execute. We can help you get started.

5. Surround yourself with positivity: Make sure the people in your business understand and share your vision. Bring them onboard, listen to them and give them ownership. Don’t let people who don’t get it, or don’t care, be a millstone around your neck. If they’re not right, do them a favour and free up their futures.

6. Use Technology: Technology can help you decrease admin, improve comms, improve reporting and accountability. Whether it’s for team communication or cloud accounting, slash paper and automate where possible.

7. Keep on top of the numbers: Do you have enough information to monitor business cashflow and see emerging trends? We can help you identify the metrics to track on a regular basis, in order to run your business efficiently.

8. Be Different: Break the mould and position yourself to attract ambitious, growing and engaged clients, and employees.

9. Deploy Marketing: Create a simple marketing plan to increase reach and penetration. Set aside a budget to treat this seriously. Start by making sure you really understand your customers. Existing customers are prospects too, keeping them happy is your first step. The more you know about them, the easier it will be to attract more of the same.

10. Take a break: Don’t underestimate the time you have away from your business. It can allow you to come back refreshed with new enthusiasm and inspiration for the way forward.

Lisa Martin Nominee for Top 50 Women in Accounting 2019

A MASSIVE congratulations to Lisa Martin on being named a Nominee in the Top 50 Women in Accounting for 2019.

We are so proud of Lisa and her achievements, not only professionally but personally. Lisa strives for excellence and wants to enable budding Accountants and Bookkeepers to deliver top quality, best practice accounting solutions to business owners. Lisa is passionate about providing change and really valuable information to business owners so they can make the best business decisions.

Congratulations again Lisa – you really are a top accounting superhero <3.

How healthy is your working capital?

How healthy is your working capital?  

We all know that cash is king when it comes to business success, but what exactly is ‘working capital’ and how does this financial metric help measure the health of your business?

Working capital is made up of the cash and assets that are available in the business to fund your operations and keep you trading. It’s worked out by taking your current assets (the things you own) away from your current liabilities (the things you owe to other people).

So, why is working capital such a critical metric?

Having the liquid capital needed to trade

It’s possible for your business to be busy, successful and profitable, but for your cash position to still be in poor health – and that can have a serious impact.

If you can’t readily convert your assets into liquid cash, it’s a struggle to meet your cashflow goals, pay your bills and fund your day-to-day operations. But with the optimum level of working capital, you strengthen your balance sheet and put the company in a solid financial position.

To achieve this healthy level of working capital you’ll need to:

  • Proactively manage your cashflow – cashflow feeds your working capital by pumping liquid cash into the company and keeping the balance between assets and liabilities in a strong position. But to achieve this, it’s vital to achieve a positive cashflow position, where your cash inflows are greater than your cash outflows. This means getting paid on time, lowering your outgoings and keeping a close eye on your ongoing cash position.
  • Monitor and forecast your financial position – running regular financial reports helps you stay in control of your finances. With careful monitoring and forecasting of your cash position, you can ensure you don’t end up in a negative cashflow position, without the requisite working capital to trade and fund the next stage in your business plan. Cloud accounting software and business intelligence apps have made it easier than ever to create up-to-date, real-time reports and run dashboards that show your key metrics.
  • Use additional finance when required – if working capital is looking thin on the ground, then additional funding may be needed to bolster your balance sheet. Short-term finance options (such as overdraft extensions or invoice finance) and longer-term business loans can be needed to keep working capital on an equilibrium.

Talk to us about optimising your working capital

Working closely with your accountant is vital if you want to promote the ideal level of working capital in the business. We can help manage your cashflow, monitor your financial metrics and provide access to additional finance and funding when your capital needs a boost.

Get in touch to start maximising your working capital.

Do you know what you don’t know?

Do you know what you don’t know? 

The Knowledge Pie depicts the proportion of what we know, what we know we don’t know, and what we don’t even know we don’t know. What will you do this year to extend your knowledge?

There’s a simple concept called The Knowledge Pie.

This concept segments one’s personal knowledge into three key areas; what we know, what we know that we don’t know, and what we don’t know that we don’t know. You might want to read that again.

An example to better explain: Jane, a young qualified plumber and business owner, knows how to do plumbing. She also knows that she does not know how to do a Tax Return… or orthopedic surgery. However, she doesn’t know that she does not know that if she tightened her Terms of Trade and debtor management policy, she’d get paid faster and improve her cashflow, making her business life less stressful and more successful.

No-one knows what they don’t know.

Many people think this ‘cluelessness’ is a lack of experience thing that affects young people… but everyone, even experts, are completely unaware of what they don’t know that they don’t know.

Imagine the average pie for any person… it could be lemon meringue or steak and cheese – you choose. Now, cut your pie in half and cut one half in half again (creating two quarters). One quarter represents what you know, one quarter represents what you know you don’t know, and the half represents what you don’t even know that you don’t know.

How do I learn about what I don’t know even know that I don’t know?

Some ways to grow your knowledge this year:

  1. Join a new network.
  2. Do some volunteer work.
  3. Get a mentor or coach.
  4. Coach or mentor someone else!
  5. Collaborate with someone that brings different skills and knowledge to the party.
  6. Learn a new skill – it could be pottery, coding, or the ancient art of tai chi.
  7. Visit a new place, town, or country; immerse yourself in the history, culture, and language.
  8. Subscribe to a new magazine, publication or podcast.
  9. Read books on different subjects.

Growing your knowledge can grow your business.

The fact is that for all of us there is much more that we don’t even know we don’t know than what we actually know. Breathe. It’s ok.

Next fact: we will be more successful in life and business if we remain open to new learning, and learning extensions and distinctions on what we already know.

Avoid having an ‘I know’ mentality about the things you do know about.

Some people close their minds when hearing about a topic they have knowledge of. They may assume that they know it all. But we can always know more… and if we shut ourselves down to new learning, we could miss an important distinction that could make a big difference.

Get in touch if you’re interested in how we can help you extend yourself this year.

“Those who keep learning, will keep rising in life.” – Charles Munger

Understanding who your customers are is essential for your business

Understanding who your customers are is essential for your business

Successful businesses really understand their customers.

Knowing your target audience is half the battle when it comes developing successful marketing activities.

When you understand the specific characteristics and needs of your customer base, you can deliver your solution at the right price, in the right place and in their language.

Learn more about your customers and you will be ahead of your competition in no time. This will save you time and money in the long run. It’s about going slowly now to go quickly later. By answering the following questions, you will be able to both identify and unlock the potential of your customers.

What types of customers do you want?

Analyse the different types of buyers for your products and determine which are likely to be the most valuable to your business, these are the customers you will want to focus on.

What revenue do you want them to bring?

Project the likely revenue so you can set a reasonable cost to acquire them.

Understanding your customer and the role your product plays in their lives

  • Use surveys and questionnaires
  • Look at comments or frequently asked questions
  • Use social media
  • Segment your customers based on buying behaviour

How do you reach them – What channels are they using every day?

Different demographic groups tend to favour different types of media, so detailed knowledge of your customer base will help you in devising a marketing campaign to reach them.

How do you acquire them as customers?

Your marketing goals will determine what approach you take for campaigns. Consider the following factors:

  • Campaign timetable
  • Campaign budget
  • Relevant audience

Knowing and understanding your customers is key to successful business and can give you a profitable advantage. Take some time to understand your valued clients and you’ll be more likely to succeed in attracting more.

Read more about understanding and attracting new customers here.

Making the 2021 Financial Year the Best Yet With GoFi8ure

Making the 2021 Financial Year the Best Yet With GoFi8ure 

Most business owners would agree that the best accounting situation is wherein their financial statements are managed properly and tax returns are filed timely – all without expending long hours. With GoFi8ure, even small businesses can accomplish their mandatory, lengthy to-do lists without mentally taxing themselves with all the demands of financial management.

GoFi8ure ensures entrepreneurs a fast and efficient way of handling accounting tasks before starting the 2021 financial year.

Working alongside trained accountants, businesses’ administrative tasks and expenditures are cut in half. GoFi8ure can professionally take care of one’s invoicing, bank and cashbook reconciliation, GST, financial records management, expenses and creditor management, wages, periodic management accounts, and annual accounts for tax returns.

It is legally required for New Zealand businesses to file their tax summaries for the income earned within the previous financial year. And, understandably, even small businesses will lack the capacity and time to do these themselves. As reliable tax agents, GoFi8ure can take care of one’s filing requirements to make sure tax returns are filed on or before the expected date of filing.

More than just filing tax returns, GoFi8ure is capable to provide businesses valuable administration knowledge. As a Xero partner, GoFi8ure offers one-on-one Xero and bookkeeping training to businesses wherever they are located. GoFi8ure can travel to Wellington, Hutt Valley, Wairarapa, Auckland, and Dunedin for the one-one-one training using real-life data while also providing cloud-based services nationwide for those who are farther away.

Xero training is customised to suit a business’ specific requirements. This allows businesses to remain hands-on when it comes to running the business smoothly this coming financial year.

Achieving financial freedom

Achieving financial freedom 

Financial freedom means having enough money to live your desired lifestyle. Is your business allowing you to hit key financial milestones such as buying a house or taking a holiday?

When you started in business, what did you imagine your lifestyle would be? How does your current lifestyle compare?

Many business owners assume that after a few years in business they should be able to achieve another financial milestone such as buying a house, upgrading the car or taking the family on an epic holiday. Reality may be different.

Is financial stress common in your business?
You invested a significant amount of cash in the early days with the aim of getting a great return on your investment. Perhaps you’re busy focusing on profit, assuming that will mean more money in the bank, when what matters even more is cashflow. After all, you need enough cash to pay your team and suppliers, invest in new business assets and pay yourself.

Achieving financial freedom means having enough money for you to live your desired lifestyle. We can help you understand the difference between profit and cashflow and help you implement strategies to improve your cashflow so you’ll have more money in the bank – both the business’s account and your own!

What does financial freedom look like for you?
It might mean paying off the mortgage early, taking an extended holiday, or just having financial security in retirement. First, you need to define what you want financially from your business.

How much money does your business need to provide to you so you can live your desired life? Start with what you want over the coming 12 months. We can then help you break this down, so you know the revenue and sales targets you need to achieve to hit the magic number.

We’ll then help you develop a plan, so you know the actions you must take to achieve your targets. We can even hold you accountable to completing these actions so you achieve your overarching financial goals and desired lifestyle.

What will your lifestyle look like in 12 months if you continue with business as usual?
Compare this to what your lifestyle would look like if you implement a plan, with clear targets, and accountability to ensure you achieve your goals. Get in touch and try something different this year!

“Real wealth is not about money… real wealth is about freedom.” – James Clear

How to manage sustainable growth

How to manage sustainable growth

The differences between those that grow profitably and sustainably, and those that disappear without a trace, are usually clear. What may not be clear are the differences between the runaway success stories and those that get stuck.

Expansion for expansion’s sake is not sustainable. Deciding you want to grow by 14 or 20 percent a year means you’re chasing numbers, instead of chasing your core purpose. And if you’re not focusing on your core purpose, you will lose your way.

If a company grows at 15 percent pa, it will double in size every five years. A $10m company that grows at 25 percent pa for 12 years will have turnover of $144m. That’s a massively different company. To survive it needs to have a clear focus on what it’s doing, why – and how.

People

Everything rests on your people. If you don’t have the right people, your business will be consumed by personnel issues, making it difficult to focus on anything else.

Strategy

When revenue is not growing as you would like, or is slowing, it is time to re-address your strategy. What are you selling, who are you selling it to and where are you selling it? What is your core ideology? Why do you do what you do?

Execution

If revenue is increasing, but profit isn’t following suit, you need to look at how you’re executing your strategy. Do your annual plan, quarterly plan and personal plans align to your goals? Do they help your team align to the company’s priorities?

Cash

It may seem obvious, but too many would-be growth companies don’t have the cash they need. Growth sucks cash – will you have enough cash to grow? Cash is oxygen to a company; knowing your cash conversion cycles and improving them is vital to let your company breathe and grow.