riding out the recession business recovery and cash flow management brian denton iems ltd
TRANSCRIPT
Riding Out the Recession
Business Recovery and Cash Flow Management
Brian Denton iems ltd
Business RecoveryIntroduction
• Why do businesses start?
Business Recovery Introduction
• Why do businesses start?• It is a strength to recognise that external help
is needed, not a weakness.
Business Recovery Introduction
• Why do businesses start?• It is a strength to recognise that external help
is needed, not a weakness.• Why do companies get into difficulty?
Business Recovery Introduction
• Why do businesses start?• It is a strength to recognise that external help
is needed, not a weakness.• Why do companies get into difficulty?• The key to successful business recovery is to
act early – as soon as a problem is identified.
Business RecoveryThe Process
• Initial assessment of the companies position.
Business RecoveryThe process
• Initial assessment of the companies position.• Analysis of the company’s present financial
position.
Business RecoveryThe process
• Initial assessment of the company’s position.• Analysis of the company’s present financial
position.• Develop an understanding of the nature of the
problem/s that the company has and the consequences.
Business RecoveryThe process
• Initial assessment of the company’s position.• Analysis of the company’s present financial
position.• Develop an understanding of the nature of the
problem/s that the company has and the consequences.
• Develop a plan to deal with the problem/s and its consequences.
Business RecoveryThe process
• Initial assessment of the company’s position.• Analysis of the company’s present financial position.• Develop an understanding of the nature of the
problem/s that the company has and the consequences.
• Develop a plan to deal with the problem/s and its consequences.
• Prepare a financial plan comprising P&L, Cash Flow & Balance Sheet, phased by month.
Business RecoveryThe process
Breakeven Calculation & Price
£Sales 100000Variable Costs 65,000Gross Profit 35,000Gross Margin 35%Fixed Costs 25000Profit 10,000
Breakeven Sales 71,429 i.e. Fixed Costs x 10035
Business RecoveryThe process
Breakeven Calculation & Price
10% Price£ Increase
Sales 100000 110000Variable Costs 65,000 65,000Gross Profit 35,000 45,000Gross Margin 35% 41%Fixed Costs 25000 25000Profit 10,000 20,000
Breakeven Sales 71,429 61,111
Sell Less/More -24390for £10K Profit
22%
Business RecoveryThe process
Breakeven Calculation & Price
10% Price 10% Price£ Increase Decrease
Sales 100000 110000 90000Variable Costs 65,000 65,000 65,000Gross Profit 35,000 45,000 25,000Gross Margin 35% 41% 28%Fixed Costs 25000 25000 25000Profit 10,000 20,000 0
Breakeven Sales 71,429 61,111 90,000
Sell Less/More -24390 35714for £10K Profit
22% 40%
Business RecoveryManaging Cash Flow
• Collect outstanding customer debts
Business RecoveryManaging Cash Flow
• Collect outstanding customer debts.• Invoice on the same day as delivery.
Business RecoveryManaging Cash Flow
• Collect outstanding customer debts.• Invoice on the same day as delivery.• Reduce or eliminate credit given to customers.
Business RecoveryManaging Cash Flow
• Collect outstanding customer debts.• Invoice on the same day as delivery.• Reduce or eliminate credit given to customers.• Liquidate surplus stock and other assets.
Business RecoveryManaging Cash Flow
• Collect outstanding customer debts.• Invoice on the same day as delivery.• Reduce or eliminate credit given to customers.• Liquidate surplus stock and other assets.• Extend credit taken from suppliers. Renegotiate
terms & where possible extend credit limits.
Business RecoveryManaging Cash Flow
• Collect outstanding customer debts.• Invoice on the same day as delivery.• Reduce or eliminate credit given to customers.• Liquidate surplus stock and other assets.• Extend credit taken from suppliers.• Defer HM Revenue & Customs payments by
agreement.
Business RecoveryManaging Cash Flow
• Collect outstanding customer debts.• Invoice on the same day as delivery.• Reduce or eliminate credit given to customers.• Liquidate surplus stock and other assets.• Extend credit taken from suppliers.• Defer HM Revenue & Customs payments by
agreement.• Consider Factoring or invoice discounting.
Business RecoveryManaging Cash Flow
• Collect outstanding customer debts.• Invoice on the same day as delivery.• Reduce or eliminate credit given to customers.• Liquidate surplus stock and other assets.• Extend credit taken from suppliers.• Defer HM Revenue & Customs payments by
agreement.• Consider Factoring or invoice discounting.• Sell and lease back essential assets.
Business RecoveryManaging Cash Flow
• Collect outstanding customer debts.• Invoice on the same day as delivery.• Reduce or eliminate credit given to customers.• Liquidate surplus stock and other assets.• Extend credit taken from suppliers.• Defer HM Revenue & Customs payments by agreement.• Consider Factoring or invoice discounting.• Sell and lease back essential assets.• Reduce overheads and direct costs wherever possible.
Business RecoveryManaging Cash Flow
CASH FLOW FORECAST
Nov-08 Dec-08 Jan-09 Feb-09 Mar-09
£ £ £ £ £
RECEIPTS
Invoiced Sales 3,600 6,013 5,826 3,781 1,901
Loan Capital 0 0 0 0 50,000
3,600 6,013 5,826 3,781 51,901
PAYMENTS
Invoiced Costs 416 476 2,214 1,122 11,185
Labour 1,774 1,774 0 0 2,496
Loan Payments 3,298 3,298 3,298 2,667 2,667
Overdraft Interest 187 195 200 204 114
PAYE/NI 0 887 887 0 0
VAT 0 0 0 198 0
5,675 6,630 6,599 4,191 16,462
NET CASH FLOW -2,075 -617 -773 -410 35,439
OPENING BANK -27,000 -29,075 -29,692 -30,465 -30,875
CLOSING BANK -29,075 -29,692 -30,465 -30,875 4,564
TOTAL OVERDRAFT FACILITY 27,000 27,000 27,000 27,000 27,000
Business RecoveryPrevent a Problem Turning into a Crisis
• Have a business improvement action plan in place and act upon it
Business RecoveryPrevent a Problem Turning into a Crisis
• Have a business improvement action plan in place and act upon it
• Prepare a financial forecast / budget
Business RecoveryPrevent a Problem Turning into a Crisis
• Have a business improvement action plan in place and act upon it
• Prepare a financial forecast / budget• Keep management accounts up to date on
Sage / Quick Books etc
Business RecoveryPrevent a Problem Turning into a Crisis
• Have a business improvement action plan in place and act upon it
• Prepare a financial forecast / budget• Keep management accounts up to date on
Sage / Quick Books etc• Compare actual performance with budget
Business RecoveryPrevent a Problem Turning into a Crisis
• Have a business improvement action plan in place and act upon it
• Prepare a financial forecast / budget• Keep management accounts up to date on
Sage / Quick Books etc• Compare actual performance with budget• Spend time monthly analysing your
management accounts
Business RecoveryPrevent a Problem Turning into a Crisis
• Have a business improvement action plan in place and act upon it
• Prepare a financial forecast / budget• Keep management accounts up to date on Sage /
Quick Books etc• Compare actual performance with budget• Spend time monthly analysing your management
accounts• Address areas of under performance
Business RecoveryPrevent a Problem Turning into a Crisis
• Have a business improvement action plan in place and act upon it
• Prepare a financial forecast / budget• Keep management accounts up to date on Sage /
Quick Books etc• Compare actual performance with budget• Spend time monthly analysing your management
accounts• Address areas of under performance• Don’t ignore problems, they are not likely to go away
Business RecoveryPrevent a Problem Turning into a Crisis
• Have a business improvement action plan in place and act upon it
• Prepare a financial forecast / budget• Keep management accounts up to date on Sage / Quick
Books etc• Compare actual performance with budget• Spend time monthly analysing your management
accounts• Address areas of under performance• Don’t ignore problems, they are not likely to go away• If in doubt, seek external advice from your bank /
accountant / Business Link