In order to manage your business effectively you need to be sure that it has enough cash to keep trading and that it is running profitably.  To ensure this happens, I recommend you review your financial status at the start of each and every business week.

 

You will have financial records, probably in one of the most popular accounting software packages such as Sage, QuickBooks or Xero.  Either your own staff or your accountants will use these to prepare VAT returns and the other legal requirements such as the annual accounts required by Companies House.  These accounting systems can also produce many of the essential figures you need to review on a weekly basis.

 

Additionally, you need to forecast which clients are likely to pay their invoices this week.  This is often not the same as those who should pay this week.   Accurately forecasting your weekly cashflow is a skill every business needs to master. 

 

Not all of the figures in the list below will apply to all businesses.  You need to establish which are relevant to you.  For example if your business works by fulfilling orders within 24 hours you will not need a figure for unbilled orders.  However if there is a lengthy period between you receiving an order, fulfilling it and then invoicing the client, then you also need to track that information. 

 

Monday Morning Figures

 

Here are the figures I recommend you track on a weekly basis as part of your Monday review.

 

Cash Position

• Cash at bank
• Cash available taking into account overdraft limits and other immediate sources of cash
• Likely cash receipts this week.  This will not be an exact figure, but your best estimate
• Total of payments you expect to make this week

 

You need these figures to make sure that you have the financial resources to see you through the week.

 

Trading Position

• Invoices issued last week, month to date and year-to-date, together with last year’s year-to-date value and this year’s budget year-to-date
• Cost of goods sold last week, month to date and year-to-date, together with last year’s year-to-date value and this year’s budget year-to-date
• Gross profit last week, month to date and year-to-date, together with last year’s year-to-date value and this year’s budget year-to-date
• Orders received last week, month to date and year-to-date, together with last year’s year-to-date value and this year’s budget year-to-date
• Value of unbilled orders or work in progress this week, month to date and year-to-date, together with last year’s year-to-date value and this year’s budget year-to-date

 

Use these figures to check that you are trading profitably

 

Month-end Figures

In addition to the above on the first Monday after the month end you should expect to see:

• Total debtors
• Total creditors
• Total value of stock and work in progress

• Total overhead costs (all costs apart from cost of goods sold) this month and year-to-date, together with last year’s year-to-date value and this year’s budget year-to-date
• Net profit this month and year-to-date, together with last year’s year-to-date value and this year’s budget year-to-date

 

You need to monitor these figures regularly to make sure you are trading profitably.  Ultimately, you do not want to learn from your annual accounts that you were trading at a loss all of the previous year.

 

Financial management is one of the areas we cover in our TwentyTwenty Insight business review process, where we provide a snapshot of the health of your business with suggestions on what you might do next to grow your business. 

 

If this is of interest, why not speak to Richard Wickes on 020 7371 7001 or email him at Richard.wickes@lgbusinessadvisors.co.uk