3 THINGS YOU MUST DO BEFORE APPLYING FOR BUSINESS FINANCE Funding and Business Growth Playbook T: 0330 350 3356 @: hello@GrowingYourNumbers.com www: growingyournumbers.com
Stock is typically measured in Days or sometimes Stock Turns. Stock Days is the theoretical number of days the company can continue operation before they run out of stock. Stock Turns is the number of times the stock is sold per annum, or looked at another way, how many times you have made a profit by selling the stock you hold in your business.
If your business carries stock or has significant Work in Progress you should work to record it and aim to keep your Stock Days as low as possible and you should work to maximise the number of Stock Turns.
Alex ’s Software Company are not a manufacturer, and they do not record Stock Days or work in progress.
If you want to know more about stock control and how best to manage to reduce the impact it has on your business and your Cash Flow, you should speak to your Accountant who should be able to help you measure, manage and control your working capital.
The key message as with all the key Cash Flow drivers, is to understand your numbers and work to:
1. Minimise Debtor Days by collecting ‘your’ money from customers as quickly as possible.
2. Maximise Creditor Days by agreeing extended payment terms with suppliers.
3. Minimise Stock Days / Maximise Stock Turns.
The impact on Cash Flow is frequently dramatic, to highlight this let’s look once again at Alex ’s Software Business and ask a ‘What If?’ question to highlight the importance of managing the key Cash Flow Drivers, at the same time as focussing on the other Business Growth Drivers. We know Alex ’s Software Company has increased profitability this year by nearly a third, up from £60K to £80K. As a reward for all the hard work Alex believes a £40,000 dividend payment would be appropriate and the company accountant agrees that is reasonable.
In common with many entrepreneurs, Alex draws the minimum salary through PAYE to minimise tax and NI, drawing the majority of income through a more tax efficient manner dividends.
Before making the payment Alex needs to look at the cash position to find out if the company can afford to make the Dividend payment.
Unfortunately for Alex the news is not good. Despite increasing profits by £20K year on year, the cash in the bank at the end of the period is showing a £53,000 overdraft.
As you will discover when you join us for the upcoming Funding and Business Growth Seminar, there are lots of ‘levers’ Alex can pull that will transform the results, most of which can be achieved without adding a single new customer. Click the link below to reserve your place.
Funding and Business Growth Playbook ^N0 V1.1 (GYN FO).docx | Confidential
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