Chartered Accountant From Leeds Talks About How To Build a Cash Positive Business

Author: Russell Smith
July 16, 2017

You’ve worked your butt off all year.

You’ve been hurtling from one crisis to the next. Winning customers, chasing customers for work, dealing with team issues, recruitment issues, working hard on sales, contemplating your business strategy, stressing about paying the wages.

Then, at the end of a hard year, you sit down with your accountant and he shows you your profit and loss account.  

At the bottom is a whacking great profit number. Your first thought is “so, all my hard work is worth it”. You revel in your own achievement for about seven seconds, until another thought pops into your head.

Where is all my money?

You sit down with one of our chartered accountants from Leeds, who explains to you the difference between profit and cash, why there is a difference in your business and —

But you aren’t listening anymore. Your mind is racing. All that work, and for what?

What does it matter that your business is profitable if it isn’t generating real cash?

Want to be a cash positive business now? Our Chartered Accountants from Leeds can help you do it! Get in touch for a free consultation.

What is the Difference Between Profitability and Cash Positivity?

The difference between profit and actually being cash positive is timing — and it really is a big difference!

If you need £30,000 next month to run your business, but it comes in the month after, that means you could be out of business.

Running a loss-making business is bad enough, but running a profitable business (on paper) where the cash never hits your own personal bank account is pretty demoralising.  

With a bit of thought and execution you can go from a business that barely breaks even on cash to a business that generates cash for you and your family.

How to Be a Cash Positive Business: Tips from Our Chartered Accountants in Leeds

At Russell Smith Chartered Accountants, we’ve worked with countless businesses struggling to turn profit into cash. Here are some tips on how to build a cash positive business:

  1. You won’t be able to do this overnight. Running a cash positive business is a strategic decision and the execution will cover all aspects of your business. It will take time to roll out, so be patient.
  2. Look at your payment terms. Are you getting paid after you do the work or before?  The difference is massive. Can you restructure your payment terms to get the cash in earlier?
  3. Can you change the entire marketing of your service? The service could be essentially the same but how you sell it could be different. For example, if you have an annual service and you get paid annually, could you turn it into a monthly service and get paid monthly?
  4. Build your business as much as possible on repeatable, retaining and regular income.  Avoid niche one-off services.
  5. Get your customers’ bank details and start controlling how they pay you, e.g. direct debits or Gocardless.
  6. Look at your expenses and truly understand what you are paying and when. Work out how timing impacts how these expenses affect the cashflow of your business.
  7. If you have a team of employees, educate them on the importance of cashflow for your business. Every sale should have payment terms wrapped into the sale.
  8. Look at your WIP system. Is it too high? Out of control? Is it being managed?
  9. Look around at your industry and do some research. What are other businesses doing that are generating more cash? Start paying for groups or subscriptions that can give you insight into your industry. Some of these will have training events where you will learn techniques, but you can also network with your competitors and steal their good ideas. They will usually not mind, since they will be proud of what a great business they have!
  10. What parts of your business are hugely profitable and easy to deliver? Sell more of these products!
  11. Focus on your best customers. Identify customers that are negative and get rid of them ASAP. They are costing you cash, time and energy. It might seem counterintuitive to get rid of paying customers, but picking who you work with is actually very important.
  12. Get your bookkeeper to identify cash flow and pore over the details of it. Understand how your business works on a day-to-day basis.
  13. Last but not least, open your mind to what is possible. You don’t have to slog away at a business that doesn’t give you — the business owner — the cash you need. You can make changes. Don’t let other people tell you what is achievable. Don’t be average.  Don’t settle for second best!

Readers are entitled to a free profit and tax saving review with our best-selling author and award-winning chartered accountant, Russell Smith. The review will cover all your profit, HMRC, tax, accountancy and financial questions — including a look at the cash positivity of your business! You can access this review by contacting us today.

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