Turnover is vanity, profit is sanity, cash flow is reality

It is important to remember that profit is not cash flow.

The majority of small business failures are a result of cash flow and not profit problems. There are many examples of small business that sold so much so fast that they could not pay their bills. Primarily because they were not paid quickly enough from their customers but now have to pay more bills to their suppliers to cover their newly increased sales. To some this will sound obvious, to others it will come as a surprise. However, the only surprise is how many business owners do not plan for their cash flow throughout the year. Often they don’t have a basic cash flow forecast, let alone the ability to model potential changes in their businesses. For example, can you model the effect on your cash flow of:

1. A change in your turnover (even a slight one)

2. An increase or decrease in your prices

3. A change in inventory levels or amounts of work in progress

4. Taking on a new salesperson or any new employee, or indeed letting one go

5. A change in your receivables or your payables (how quickly you get paid from your customers or pay your suppliers)

6. Reducing your overheads

7. Increasing your borrowings

Do you just carry out changes and assume or hope that it will be beneficial?

Do you just try and increase your sales and assume or hope that this will be good for business?

Sadly, whilst an increase in sales is normally good for business, surprisingly often it is not. It can cause a myriad of problems such as more work, increased overheads, cash flow problems, operational or production issues. It is always better to model the changes before you carry them out to see what the impact will be on your business and, indeed, your life.

The above exert was taken from a Business Advisor and although some may think it states the obvious, a surprising number of Business owners i've met just plod on regardless until the money has run out then look confused when its all gone

One way you could improve your cash flow, and I wish I'd done it, is to register for VAT using cash accounting. Then you only pay VAT on money you've actually been paid, and not on money you've invoiced for like I do which can mean you're paying VAT on money you haven't had yet.

You should base your vat return on actual monies paid out and receieved but thats another story

Sounds like good advice to me, Keep your overheads as low as possible until you find your feet, You would be right on the crap before you start if you spent £20k on a large van to find all you work is small stuff, We are on the point of looking for another van and part time driver but I'm reluctant as it then starts getting complicated!

If in doubt sub it out... lol

Yep true but we have a shortage of small vans in my area, and there is not always a passing driver available, Axminster and Weymouth always prove to be a challenge,

my van is getting a bit long in the tooth(like the driver) and it would seem sensible to retire my van and get a newer one and keep the original as back up/part timer, but trying to find a sensible driver with a can do attitude is proving slightly difficult,

Keep with it, despite what we are led to believe, there are plenty of real workers out there willing to give 110% to the cause

Speed Couriers Nationwide said:

---

You should base your vat return on actual monies paid out and receieved but thats another story

Actually it seems from reading this page you can join the cash accounting scheme at any time after you've registered so maybe I should do that.