It’s time to get personal

The new year is often the time for resolutions which by this time in the year have often fallen by the way side. Even the resolution to start planning for the next year can be a goal that is never fulfilled. But planning for the future is a key part of making sure that you are in control of your business and your life and not the other way around.

Do you have a clear idea of what you want to achieve personally over the next 20 years? In 2039 when you look back, what goals would you like to have ticked off and what resources do you need to put into place to achieve these goals?

These are questions a good goal based financial planner helps you to get clearly defined.

But why is it important to know the answers to these questions?

Anyone who reads my blog regularly will know that I am passionate about planning and believe that it is much more likely that we will achieve the results we want, if we have a plan in place. This applies equally to personal goals and to business goals. And they are interlinked. It is unlikely that success meeting a business goal will be meaningful unless personal goals are also met. In fact, I believe our personal hopes and desires should provide the backdrop to our business goals – especially where we are business owners. After all, how is a business successful if it does not reflect the owner’s personal values and fit with their life plan?

I have discovered, by working with my goal based financial planner Andrew Stinchcomb, that there are key things I want to achieve in my life. Some of these things have always been clear to me – others have come to light through discussions with Andrew and my husband, Jeff. The key outcome has been that we now have a clear idea of what we need resource-wise (and this inevitably means money) to make our dreams a reality.

It’s funny what comes out in the wash in our discussions. A while back Jeff and I had a light bulb moment. We had always talked about taking a year out when our boys leave home to travel around Europe in a camper van. It was originally a pretty lose idea and more of a dream than something we thought we might really do. However, this idea crystallised into a key goal during our discussions – such that, should it not happen, I would feel really bereft. Andrew gave us a clear idea of how much per month we needed to save and invest wisely to make it happen.

As my business is my only source of income, I therefore had, and still have, a very clear picture of what I need to accomplish business-wise, in terms of number of clients and levels of income. This has made it much easier for me to identify good opportunities as they are presented to me and to motivate myself. I know what I will be sacrificing if I don’t push myself.

So take a look at your life goals and ask yourself “Is my business providing to route to these goals?”.

🙂

Fiona 

Collecting the cash

Piggy Bank

In these turbulent times it is more important than ever to be on top of cash collection. However, many small business owners find it a real challenge to chase customers who are late paying.

A phrase we hear often is, They’re a really good customer, so I don’t want to annoy them by chasing for payment”. Let’s just analyse that sentence for a minute. Why are these customers good for your business? Because they allow you to do lots of work for free? Surely, a good customer is one who appreciates your efforts and is happy to pay because they value you. If you have done the work you agreed with your customer, to the level they expected, why should they not pay the agreed price in the agreed time period?

So don’t be shy about collecting YOUR money.

Other problems we see regularly are:

              Not setting payment terms up front

If you have not agreed when the customer should pay BEFORE the work is done, you will struggle to collect the money in a reasonable time frame. Make sure your terms of engagement/purchase confirmation clearly state when you expect to be paid.

              Setting unnecessarily long payment terms

Don’t assume that you have to offer customers 30 or 60 day payment terms. Start from a position of offering zero payment terms and only offer extended terms if there is a commercial advantage in doing so. Bear in mind that even if you offer 30 day terms you will most probably be paid later than that. As you don’t know the financial position of all your customers the only safe money is the money in your bank account.

              Not sending invoices out promptly

If you do not send out your invoices as soon as the work is complete, you automatically build a lag before you receive payment. Invoicing is a chore, but regular invoicing is vital to achieving financial stability.

The most common reason small businesses fail is because they run out of cash.

The most common reason they run out of cash is because they do not collect the money they are owed quickly enough, or allow debts to go bad.

Make sure you business succeeds by being cash collection savvy.

🙂 Fiona

How to get paid revisited

getting paid

Getting paid is a blog theme that I come back to on a fairly regular basis because I often come across service providers who are finding it difficult to get paid. There are clearly two sides to this particular coin – us and the client. We can be as much, or more, to blame as our customers for not getting paid, because of the way we think and act.

Firstly, as Brits we are sometimes embarrassed to talk to clients about fees and payment. Some business owners hide behind hourly rates, which means there is no upfront agreement about exactly what the client will be expected to pay. This means it is highly likely there will be disagreement and therefore delay in payment. Not only that, but disagreement about fees can leave a bad taste in everyone’s mouth.

Secondly, many service providers are slow to invoice, which means clients receive bills quite a long time after they have had the service. This sends a message to the client that the supplier is probably pretty well off and so doesn’t need the cash quickly (or the invoice would have been sent more promptly). Consequently it is more likely that payment will need to be chased.

Other suppliers do not make it clear what their payment terms are. Now, it is in clients interests to delay payment as long as they can (especially at the moment when many businesses are finding cash flow difficult) so if you are not clear on payment terms you cannot be surprised when payments don’t come through. Make sure your letter of engagement clearly states what your payment terms are and re-iterate these terms on your invoice.

Further to payment terms ask yourself the question ‘Am I a bank?’ If the answer is no (as I expect it is for anyone reading this blog) only give credit if it is absolutely necessary – and then ensure there is some allowance for interest in the price you are quoting! Otherwise, make your payment terms ‘payment on receipt of invoice’. You probably won’t get paid immediately but at least you can chase earlier.

I know business owners who don’t like chasing for payment, even if they have agreed a fixed price, invoiced promptly and have clear payment terms, because they think their good clients will think badly of them. This, in my opinion, is the worst ‘sin’ of all. Firstly, GOOD clients pay as agreed in the contract – a good client is not one who bitches about the agreed price and then fails to pay promptly. Secondly, we are business people who should expect to be paid for a good job done, so there is nothing to be coy about when it comes to asking for what you are legally and morally entitled to!

So, to recap:

1.  Agree clearly with your client the exact terms of the engagement both in terms of job to be done and fee to be paid.

2.  Bill as soon as the job is complete.

3.  Be clear on your payment terms and give as little credit as possible.

4.  Be professional! If money is owed to you do not be coy about chasing for it.

Fiona 🙂

Have you mastered your business finances?

Screen Shot 2015-05-01 at 16.26.04

Many owners/managers of small businesses (and larger ones for that matter) struggle to understand their business finances. This lack of understanding can make it very difficult for them to make the right decisions for their business.

Now, I am sure my accounting colleagues would not mind me saying that, most accountants make lousy entrepreneurs. We just lack the creativity and drive which makes entrepreneurs so effective at getting new business ideas off the ground.

So why should entrepreneurs/business owners be great accountants?

Each role requires an entirely different skill set and way of working and, indeed, a different personality type (if you are familiar with DISC profiling). So don’t be shy about admitting that you are stuggeling with the money side of your business.

Many business owners do not seek the proper help and guidance, or have the right level of financial information, to help them make decision.  To me this is a huge mistake which can lead directly to business failure. As a responsible business owner/entrepreneur you do not need to be a trained accountant but you do need to have enough knowledge of financial issues to run your business effectively.

So what do you need to do to get this knowledge? Well, for starters:

  1. Ask lots of questions of your accountant about why the figures are as they are.
  2. If you only receive figures from your accountant once a year, several months after the year has finished, this is not enough! You need to have regularly updated financial information to make decisions on a timely manner.
  3. Have a properly thought through profit and loss and cash flow forecast so you can manage your cash – and make sure it is regularly updated for what has actually happened.
  4. Don’t just be happy with knowing how much you have sold in total and the margin on this total figure. Ask how you can get information on individual customers, products and projects so you are clear which activities are profitable – and which not.

It is not good enough these days to just shrug and say “Well, I am just not good with figures”. You started your business to make a living for yourself, and any staff you have, and you owe it to yourself, and them, to have a good handle on the money in your business.

To help I have written “your guide to understanding business finances” which can be downloaded for free from my website www.fionabevanfinancialmanagment.co.uk

Good Luck

Fiona 🙂

The price is right!

Pricing is an area many businesses struggle with. It is part science, part art and part psychology. Confident pricing is as much about how we feel about our business and our product/service, as it is about rules and processes.

Many businesses will stick to a cost plus method of pricing. They will add up all the components of a job and add a percentage for profit – job done (?). However, this approach takes no account of the market in which they are trading or the value of their product/service to the customer.

If you don’t know enough about your market you run the risk of overpricing by using the cost plus pricing method. If other suppliers are providing the same product/service as you and charging less than you, you need to know! If you constantly loose work it may be that you are pitching to the wrong type of customer for you.

Alternatively if you don’t understand the value of your product/service to your customer, you could be regularly underpricing. Take, for example, an instance which happened to me a couple of months ago. We had just had new carpeting through out the upstairs of our house. You know how it is, for a micro second everything looks great until… the cat gets trapped in one of the bedrooms and rips up the carpet in front of the door!

I phoned our lovely carpet guy who came along and patched in some of the offcut left over from the original fitting. He did such a good job that we cannot actually see where the join is. Obviously for me this job had a good deal of value because our carpet is pristine again. But he priced on a cost plus basis and so only charged me £15! He probably left over £80 on the table because the job was worth at least £100 to me.

Now cost plus as a starting point is not bad, because at least you ensure you get the minimum price you need to cover your costs – as long as you have a very good idea what those costs are. But relying on it alone will mean that you undercharge clients for whom the value you provide is more than the costs of providing it (plus profit).

For effective pricing you need to do your homework. You need to understand the market you are in; who your ideal customers are and what they value; and you need to have a very clear idea of what you need to achieve to make a profit.

For more information about effective pricing please download my guide Pricing

Fiona 🙂

Be cash savvy

Cash is king! and managing it properly is one of the best ways of ensuring your business flourishes. However, many small business owners find it a real challenge to chase customers who are late paying – even though not doing so leaves them in a really tight situation with the bank.

A phrase we hear often is, “They’re a really good customer, so I don’t want to annoy them by chasing for payment”. Let’s just analyse that sentence for a minute. Why are these customers good for your business? Because they allow you to do lots of work for free? Surely, a good customer is one who appreciates your efforts and is happy to pay because they value you. If you have done the work you agreed with your customer, to the level they expected, why should they not pay the agreed price in the agreed time period?

So don’t be shy about collecting YOUR money.

Other problems I see regularly are:

Not setting payment terms up front

If you have not agreed when the customer should pay BEFORE the work is done, you will struggle to collect the money in a reasonable time frame. Make sure your terms of engagement/purchase confirmation clearly state when you expect to be paid.

Setting unnecessarily long payment terms

Don’t assume that you have to offer customers 30 or 60 day payment terms. Start from a position of offering zero payment terms and only offer extended terms if there is a commercial advantage in doing so. Bear in mind that even if you offer 30 day terms you will most probably be paid later than that. As you don’t know the financial position of all your customers the only safe money is the money in your bank account.

Not sending invoices out promptly

If you do not send out your invoices as soon as the work is complete, you automatically build a lag before you receive payment. Invoicing is a chore, but regular invoicing is vital to achieving financial stability.

The most common reason small businesses fail is because they run out of cash.

The most common reason they run out of cash is because they do not collect the money they are owed quickly enough, or allow debts to go bad.

Even big businesses struggle if they don’t manage their cash effectively – just look at the recent example of Carillion!

Make sure you business succeeds by being cash collection savvy.

Fiona 🙂

Is it just the weather we should be forecasting?

ForecastingIf you mention forecasting in mixed company you can see a small shudder run around the room.

Many business owners don’t know how much money is in their bank account on a day to day basis and look at their accounts only once a year, so the idea of forecasting for the future leaves them cold.

However, in not doing cash flow forecasting (at the very least) these business owners are putting their businesses at real risk. Banks are reluctant to lend money unless businesses can show they have a solid financial base and businesses that don’t control their cash flow can find themselves really struggling – even if they are profitable.

Forecasting forward can help ensure you don’t suddenly run out of money. If things are going badly you at least have forewarning of when you MUST get some money in and have time to do something about it. You can then use your forecast to help the bank – or any other parties you are hoping to secure funding from – understand your business and who investing in your business is a good bet for them.

I have written a free guide to help you with forecasting for your business which you can download from my website http://www.fionabevanfinancialmanagement.co.uk/guides.php

Fiona:)

Price effectively


Pricing is a big problem for most businesses.

In simple terms if you charge too much you may struggle to get customers. Charge too little and you won’t make enough money.

But pricing can reveal more about your company than you may think.

If you regularly price at a lower level than people would expect to pay for your product/service, prospective clients may assume that your work is of a low quality. So bizarrely you may find you don’t get approached by your ‘perfect’ client because they think you are not up to the job.

On the other hand you can be ‘reassuringly expensive’ and draw people to you.

For help with getting your pricing right you may like to download the free pricing guide on my website http://www.fionabevanfinancialmanagement.co.uk/guides.php

Fiona 🙂

Are you an April fool?

getting paid

Over the years I have met business owners who offer a great product or service but are really struggling with their cash control.

One of the reasons is exemplified by a conversation I had the other day with just such a business owner. They have no problems finding the right customer and do a fantastic job for these customers.

However, the business owner has a real stumbling block when it comes to invoicing and debt collection. Firstly, they hate the process of invoicing itself – it is a chore they put off as long as possible. Secondly, once the invoices have gone out they are very reluctant to chase for the money owing to them.

In my opinion they are being an April (and every other month of the year) fool.

They are working hard but because they are not following through, and collecting the money owing to them in a timely fashion, they are struggling to pay their bills.

What makes the situation worse is that they have employees they MUST pay every month irrespective of whether the business is paid or not.

There is a clear lesson to learn here – if you are unable, or unwilling, to deal with the discipline of invoicing and debt collection you must find another way of getting these jobs done. If you don’t, you may lose your business.

So what are the alternative approaches you can take?

Firstly, many bookkeepers are more than willing, and able, to take on the invoicing and debt collection roles for you. The benefits of delegation will way out-weigh the costs.

Secondly, you may already have a member of staff on your team who can take on these jobs.

Thirdly, if you really have to do these jobs yourself, you must change the way in which you approach them. Have a very clear procedure detailing exactly how often invoicing should be done (at least once a week would be my recommendation), block out time in your diary every week devoted to invoicing and debt collection, and understand that any work you do for clients is worthless unless you are paid for it!

For extra help with invoicing and debt collection please download the ‘Getting Paid’ guide on my website http://www.fionabevanfinancialmanagement.co.uk/guides.php

Good luck

Fiona 🙂