The Unkempt Bed
The Sleep Killer
We all know how tough it is to be a business owner. We need both physical and emotional resilience against to constant challenges and be able to relax and recharge when the time is right.
An essential part of that recharging is sleep.
If you want evidence of this, go and read ‘Why We Sleep’ by Matthew Walker. This book explains why getting a good night’s sleep is essential for every one of us.
So why do so many of us sabotage this vital part of our recharging? I’m not talking about physical or mental health, as important as they are but about your financial health.
The one thing that seems to keep up many business owners is worrying about their finances and especially cash flow.
How do you make to your financial bed a place of comfort ?
So here are 5 steps to put in place, to make your financial bed so that it will be a place of comfort and not of stress.
The Bedstead and the Mattress
Your business bank account is not your personal account. Any expense you pay that is not business related and therefore cannot be listed as a business cost, should be paid from your personal bank account. Not doing so causes confusion and unnecessary complexities that are energy sapping to unravel.
Likewise, when you start having to pay business expenses from your personal account, because the business cupboard is bare, you know your business has a cash flow problem and that needs immediate attention.
Clear Your Head
Setting financial goals is vitally important if you have growth ambitions. They clear your head and help you focus on your marketing and selling activity, letting you know when you are falling short or when you are sitting pretty. Those goals should stretch you a little but not be impossible to reach. You’ll end up fretting over the latter and that will add even more to the turmoil of your anxiety.
Select Your Sheets
Sales Forecast Sheet
Your dashboard should show the dials with which you can track your business and the most important dial is your Sales Forecast for the next year. This is where you list your products and services, forecasting how much revenue they are going to generate for you each month.
Income and Expenses Forecast Sheet
Your Sales Forecast drives the Income Section and you complete Expense Section, listing all the costs that your business is likely to incur each month. Some of those cost lines will be estimates but be as informed a s possible, as this will indicate how much Net Profit you are likely to make each month.
Cash Flow Forecast Sheet
If revenue is vanity, and profits are sanity, then cash flow is reality. This forecast is based on your Income and Expense sheet and shows the cash you will receive from your sales and when you will receive it. A wonderful profit on paper may look good but if the cash is taking an age to roll in, you may not have the cash you need to settle suppliers, pay staff and fend off the taxman when he comes knocking.
The Right Pillows
The Base Pillow
The first pillow on your bed is your contingency pillow. When each invoice is paid, start setting aside set aside cash into a separate ‘Contingency’ account. Start with 1% of operational cash received and when you feel comfortable with that , then up it to 2% until you reach 10%. This amount will soon grow and be a great base that creates cash resilience in your business.
The ‘Peace of Mind’ Pillow
Taxes are one of the inevitabilities of life, so set money aside for it. Based on your invoices, set aside the cash for corporation tax or self assessment each month and put that into a ‘Tax’ account. When the taxman inevitably comes knocking, you already have the cash to pay the bill without any stress or headaches.
The ‘Comfort’ Pillow
If you are VAT registered then you know in your heart that you shouldn’t be spending the VAT, yet many still do. When the bill comes, it can cause mayhem if the cash isn’t there and having been through two VAT inspections in the past, this is one person you will never want to entertain. Setting aside money for VAT, (around 10% of the VAT element for each invoice) means that you can pay each bill and keep that demon away.
Tidying the Bed
Keep reviewing your costs and your suppliers. I’ve known business owners who are still paying direct debits for items they never use or no longer need. Make sure you account for everything, including anything on personal or business credit cards. Clearing out old costs and trying to find cheaper deals can be as good for improving your net profit as selling more.
Love Your Dreams
Now you have a handle on your cash, you can start dreaming about your next moves, how you can grow and where you can invest. Get excited about the possibilities ahead and the expansion of business and not about the coils of doubt and worries that are squeezing the life from you.
Want to know more ?
If you would like to learn more about how we can help you Make Your Business Finances Less Stressful, then join us for a free webinar on Tuesday 28th February 2pm GMT for more tips to help you sleep at night.
Just click the button to book your place.