RI Advice – Adele Martin7 Cashflow Sins

<Adele Martin is an Authorised Representative of RI Advice Group Pty Ltd

Over 20,000 !*

How many small businesses fail each year?

Small business statistics

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Number one reason business fail?

Cashflow

*http://www.innovation.gov.au/SmallBusiness/KeyFacts/Documents/AustralianSmallBusinessKeyStatisticsAndAnalysis.pdf

• Change terms of trade e.g. from 90 days to 30 days

• Pre-payment / deposits

• Enable credit card payments

• Invoice system – policy & knowledge of work in progress (WIP)

• Policy for collections

Sin No. 1: Slow Collection

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How can you speed up collection?

• Paying bills such as tax, super, workers comp monthly; or

• 30-40% of income to separate bank account for tax, super, workers comp

• Float or overdraft

Sin No. 2: No cash to pay the bills

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Options to consider

• Sole trader Vs company Vs trust

Sin No. 3: Paying too much tax

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Are you in the right structure?

• Do NOT treat business as a personal slush fund

• Have a weekly “wage”

• Have a dividend policy

Sin No. 4: Mixing business with pleasure

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• How often do you review your profit and loss?

• Profit and loss is history BUT you can learn from it

• RI Advice can assist you to use your profit and loss to:

–Compare to yourself; &

–Benchmark against your peer group

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Sin No. 5: Use of historical information

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• Operate on accruals

–Profit based on when invoiced

–Profit does not necessary equal cash

• Reasons profit high but low cash:

–Too much stock

–Problems debtors

–Paying down debt

• Cash is King + Profit is Queen

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Sin No. 6: Look at Profit + Cash in Bank

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• Business making good money – but where does it go?

• Common scenario:

– Age 50

– Earning good money for many years

– Little equity in houses

– Nothing in super

• Why? = no one has asked about personal situation

• Accountant & Financial Adviser can bring business and personal together

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Sin No. 7: Don’t ignore your personal situation

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How is making a profit like losing weight?

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AIM Lose weight Increase profit

PLAN Diet and exercise Marketing, sales target, expense review, structure, target clients, sales volumes, etc

MEASURE Calories consumed, centimetres and weight lost Monthly tracking of your plan’s KPIs + how you compare to your peer group

GREATER SUCCESS WHEN

Accountable to a 3rd party like Weight Watchers or Biggest Loser

Accountable to a 3rd party eg financial adviser/coach, accountant, etc

EDUCATION Learn to look for calories, conscious of portion size, etc

Understand how to read your financial statement + learn to love and understand terms like EBIT

Questions?

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• Questions?

• Copy of presentation available on my LinkedIn profile

–Adele Martin, RI Advice

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Disclaimer

Important Notice

RI Advice Group Pty Ltd, ABN 23 001 774 125, holds Australian Financial Services Licence Number 238429 and is licensed to provide financial product advice and deal in financial products such as: deposit and payment products, derivatives, life products, managed investment schemes including investor directed portfolio services, securities, superannuation, Retirement Savings Accounts.

The information presented in this seminar is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. RI Advice Group strongly suggests that no person should act specifically on the basis of the information contained herein but should obtain appropriate professional advice based on their own circumstances.

RI Advice Group Pty Ltd | ABN 23 001 774 125 AFSL 238429