If you’re a business owner, it won’t have taken long for you to appreciate why there is so much talk about the importance of cash flow in any business start-up books you may have read.
>>> Why Cash And Cash Flow Are Important
You’ll have found that it is easy to spend money but much more difficult to make sales and to collect the cash when it’s due to be paid.
In this article I’m going to look at:
In this article we are going to look at possibly the most important concept and key performance indicator in any business, the customer lifetime value (CLV).
You will see the concept also referred to as:
It is a KPI that explains how much a customer on average is worth to a business of its entire relationship.
You will see some people refer to it in terms of sales revenue.
This is wrong and misleading. It can cause you to make the wrong decisions about attracting and retaining customers. [continue reading…]
Break Even Point Analysis is a very simple to understand financial model of a business which I believe every business owner should understand.
It can be quickly used to help guide business decisions that will impact on the financial performance of the business.
When I have taught this idea to business owners and managers in Finance For Non-Financial Managers courses, the people have been amazed at how the financial fog lifts and things start to make sense.
A business is said to break even when it operates at a sales level that neither makes a profit or loss.
The two big issues to focus on are:
The Break Even Point Formula which calculates the break even point is:
Fixed Costs
Contribution % or Contribution per unit [continue reading…]
Can you make finance and accounting sexy?
Author Rhondalynn Korolak does an excellent job in her book.
This is not your average, very dry and boring finance for non-financial managers book.
As the title suggests, there is a frisson to the way she educates you on the need for more effective financial control in your business.
The training is delivered in a charming and easy to read way. [continue reading…]
Following up on the articles
>>> How To Increase Cash Receipts In A Cash Flow Forecast
>>> How To Get Payments In Advance From Customers
we will look at credit control and the issue of…
There are two issues with collecting the cash for sales made on credit accounts:
Following up on the article
>>> How To Increase Cash Receipts In A Cash Flow Forecast
We will look at the issue of getting payments in advance of doing the work from your customers.
One of the fastest way to increase cash receipts in your cash flow forecast is to ask for receipts in advance (although you would ask customers to pay in advance from their perspective). [continue reading…]
Many years ago I was told the banker’s mantra and it’s always stuck with me as the explanation for why all businesses need effective financial control.
Turnover Is Vanity, Profit Is Sanity But Cash Is Reality
Read it in, learn it and take it to heart.
It contains one of the core secrets to long term business success.
Fixed Cost Creep happens when fixed costs increase as sales and activity volumes increase.
This idea may seem strange.
The basic definition of a fixed cost is that it stays constant.
In reality it increases as the business commits to further costs. Hopefully it increases at a much slower rate than variable costs.
Not recognising and adapting to this idea can give a business owner unrealistic expectations about future profitability.
It can also lead to an assumption that fixed costs shouldn’t be or can’t be reduced if volumes are reducing either deliberately or because the business is going through a hard time. [continue reading…]
If you need to improve your cash flow, you have three options:
This article will focus on the first…
First the basics:
The Margin of Safety is a very useful measure that should be used together with break even point calculations.
The break even point identifies the sales volume or value where a business neither makes a profit or loss in the period.
>>> Why Break Even Point Analysis Is Important
>>> The Cost Volume Profit Relationship
>>> How To Calculate The Break Even Point Of A Business
The margin of safety is the extra sales value or volume the business has sold in a period in excess of the break event point.
Here is a quick example. [continue reading…]
I was a consultant, small business coach and advisor based in Birmingham, with over 35 years business experience, including more than 20 years as self employed.
My main business qualifications are:
– Chartered Accountant
– MBA
– Certified Guerilla Marketing Coach
My main interests are in helping business owners who are stuck get unstuck by thinking more clearly about their issues and possible solutions.
I no longer provide professional business coaching but I will be sharing more ideas on my blog and will continue my popular business book reviews.
I can be contacted by email at Paul@BusinessDevelopmentAdvice.com
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