How much cash should you leave in your business and how much should you take out?
The generally accepted wisdom is three month’s worth of costs. I don’t know the source of this figure, but this seems about right. If all your income stopped overnight, you would have three months to make plans.
In reality, unless there is a global pandemic, it’s unlikely that your income would all stop at the same time, so you’d probably have longer to find funding, start a new income source, or to ride out a temporary blip. Most income protection insurances take 3-6 months to kick in.
We should also have a similar amount easily accessible to cover our household bills.
The last eighteen months have been tough, but we need to rebuild our reserves ready for the future.
How long would your reserves last you?
What’s the worst that can happen?
I did it! I completed my first triathlon in over four years!
Not only did I complete it but I managed to do it in similar times to fours years ago when I was much fitter.
It wasn’t fast and it certainly wasn’t pretty (everybody’s bum looks big in a wetsuit!) but a large proportion of the entrants were DNF (did not finish) and others were DNS (did not start).
And it’s the same in business. Too many people miss opportunities because they never get started.
I’m a great supporter of Bryony Thomas’ principle of overcoming perfectionism by releasing things which are “functional but not too embarrassing” then coming back and improving them at a later date. I write my books quickly to capture my thoughts, and then edit slowly to make sure that my readers will be able to follow those thoughts.
I also use a business coach (as well as being a coach myself) because, although we often know what to do, we never get around to it without somebody to hold us accountable.
So this week why don’t you JFDI (Just F Do It) and perhaps even join one of our September cohorts to help you to do it faster?
Myth busting: build it and they will come?
I’ve seen lots of startups think that, just by buying stock or building a website, they will automatically generate business but, as you experienced people know, it’s a lot harder than that.
How many things do we think will happen automatically?
I buy more books than I have time to read so I’ve had to replace my bedside table with a book shelf, not to mention my Kindle.
I buy new sports kit in the hope that it will get me one step closer to the gym. And don’t get me started on all those people who crowd into the gym in January but are nowhere to be seen by February/March.
I read business books or listen to talks and don’t implement the actions. These days I do make sure that they at least get written onto a to do list on Trello. I get some lovely comments about my books but I wonder if my readers are as bad about implementing as I am?
In an attempt to provide better value for money I set up online coaching programmes to work through the books and more. Each webinar is accompanied by an action list and we have three cohorts a year to work through these together. It may cost more than £14.99 for the book but, if you’re anything like me, it provides much better value because things actually get done.
What do you have to do to improve your business and make it work for you?
Efficiency: conserve your strength for the long haul
Lots of triathlon and sports metaphors to come. Triathlons, like running a business, are an endurance event. We’ve seen the Brownlee brothers and others helped across the finish line (there’s another message there about needing support, even in individual sports). Speed alone is no good if you can’t make it to the final goal.
Working long hours just won’t crack it as many folk are finding out after working through stressful lockdowns without a break.
Personally I like my 25 hours working week spread over 5 days. I can feel my brain slowing down throughout the day so better to go and do something nice with family or friends, or a bit of alone time rather than push on through (unless there’s an exceptional deadline).
Whatever hours you choose to work you want every one of them to count and that’s why we focus so much on efficiency on the online courses and couching sessions.
Look for one thing you can do more efficiently this week; perhaps by automating or delegating it or just improving the system.
What’s so special about 30 days?
What are your payment terms? Do you even have stated payment terms?
Most businesses seem to opt for 30 days from the end of the month of invoice which means that the wait an average of 45 days to be paid.
But accounting systems are far faster now than when I joined the workplace 30 years ago so surely it’s easier to register, approve and pay invoices much faster now than all that time ago? Personally, as a small business, I find it easier to pay invoices as they arrive to minimise admin time. But not everybody is in such a strong cash position.
My standard payment terms are 7 days from invoice so an average of, well, 7 days. And most of my clients pay me by direct debit which costs a few pennies but the integration between Gocardless and Xero means that it does all the bookkeeping entries to so saving me precious time.
When speaking at conferences I’m always paid the full amount before I travel to the event as organisers like to take a few days off afterwards rather than fuss over invoices.
Is it time to review your payment terms to improve your cash position and, in turn, to pay your suppliers faster?
Are you making progress?
I was talking to a client today who felt that she hadn’t made progress because she hadn’t actually achieved any of the goals that she had set herself.
Sometimes business feels like this. It’s a bit like running on the flat ground between hurdles. There is still forward motion even though you haven’t increased your hurdle count.
We might set arbitrary deadlines of month end cash collection targets. If a large cash sum arrives the day after month end then, in harsh terms, you’ve missed the target but, in reality, it’s only a day behind and may still be a new record.
I like to break projects into lots of smaller hurdles but please don’t forget that you are making progress when running between them on the flat too.
Please do set yourself nice stretch goals but applaud yourself for the bits in between too.
Making Tax Digital – ITSA
As we adapt to a post-Brexit world with Covid, accountants are also trying to look forward to the next phase of MTD (Making Tax Digital) for Income Tax and Self Assessment.
This will affect the self employed and those with rental income (not profit) of more than £10,000 per year. I won’t go into the detail as that is available elsewhere, but I wanted to point out the timescales and why we’re already taking action with our own clients.
It’s quite a busy timeline. Most self employed use a 31 March or 5 April year end but, if not, you will have to provide current figures before the actual year end is complete. The timeline below is for a 31 March year end with a similar VAT quarter. As you can see it will be a busy 10 months with 2022/23 SA submissions to be done at the same time as 2023/24 quarterly submissions.
Of course, we’re still awaiting a lot of detail from HMRC, but our plan is:
– 2021/22 get all clients onto software with monthly bookkeeping (theirs or ours) checked by Xavier (Dext Precision) to ensure up to date digital records
– 2022/23 dummy run of MTD with a soft close each quarter to iron out any problems
– 2023/24 go live knowing that HMRC will probably offer a soft landing
Have you started to think about the next stage of MTD yet?
How do you want to spend your day?
When I first set up my business I had a vision of how I wanted to spend my days and you probably did too.
I wrote mine down but you may have a vision board or another means of capturing what you, personally, wanted out of your business. (If not then you should consider doing this now)
How does your typical day compare to this ideal?
Over the last 16 months many of us have drifted away from this but we now have time to catch our breath and make improvements. I could tell of the benefits of a decent business coach to make things happen in your business but you can still do things for yourself.
What ONE thing can you do today to move your business closer to the business you originally dreamt of? Now do it. TODAY.
Is your business working for you or are you working for your business?
When I started up each of my businesses I had a dream. Not a huge, Martin Luther King type of dream that would change the world, but a smaller dream of helping business owners while having a decent work-life balance for myself.
I wrote down my vision in one sentence. Nothing complex but just to remind me.
And each time I had to make a big decision I came back to my dream to see whether this particular decision would move me closer to my dream.
But often we make a lot of smaller decisions that mean that our business drifts away from that dream and we just end up with a job that we have to do in order to pay the bills. When I work with clients on our individual or group coaching programmes I encourage then to recapture that dream but also to take actions.
Here are some of the actions that you can take:
- Review your pricing to ensure that you are being paid what you are worth
- Review your clients to ensure that you are selling to the right people profitably and enjoyably
- Review the type of work that you are doing to ensure that you are doing profitable AND enjoyable work
- Review your marketing to ensure that it is all aimed at getting more of the right people and the right work
- Review how you are spending your time to see if there are things that would be better off delegated or outsourced. How many small business owners are trying to do their accounts at the end of a long week? And how many accountants are doing their own graphic design?
You may prefer to do this on your own but, if you want some accountability, then come along to our monthly Flyby sessions (see below). If you would like more proactive input or specific advice from me then try our coaching programmes.
Chairing effective meetings
We’ve all been stuck in ineffective meetings. They overrun on time, one person dominate the conversation and the wander off topic.
Whilst we can’t always control other people’s meetings (other than by being a considerate attendee) we can control our own.
Here are a few tips for chairing effective meetings:
- Circulate a clear agenda including timings
- Circulate any papers and other information beforehand. A couple of days before is best as, if you send things out too early, people set them to one side to read later and then forget
- Only invite the necessary people, you can send minutes to others
- Take contemporaneous minutes so that they can be circulated straight away rather than trying to find time to write them up afterwards.
- All actions should be assigned a clear name and due date
- Start the meeting on time. Respect the time of those who have made the effort to turn up on time rather than waiting for somebody who can’t be bothered. If you have a reputation for starting promptly most people will make more of an effort
- If you need more time to discuss and item then schedule a separate meeting
- Control the personalities; silence the overtalkers and encourage and listen to the introverts.