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The Value of MEASUREMENT

By Edward Tudor

Curved measuring tape. Measuring tape of the tailor. Closeup view of white measuring tape.

Knowing what to measure and how to measure it can make running your business easier.

To make better decisions you need to gather the relevant data and format it into a report showing the essential information.  Your decision makers can then be taught how to use that report to make sensible decisions or to recognise that they need additional information or instructions from you.

For Measuring your Cash Flow you need to know:

  • Who your debtors are, how much they owe you and when they are likely to pay.
  • Who your creditors are, how much you owe them and when you need to pay them.
  • What your regular outgoings are (rents, rates, salaries etc).

Only when you have gathered the data can you then make a reasonably accurate Cash Flow Forecast.  This will enable you to make decisions about who to chase for cash and who to pay in order to manage the cash in your business.

When making a decision on buying a piece of Capital Equipment you should:

  • Research the equipment you want to buy for functionality and price.
  • Establish the reliability of the equipment
  • Be aware of the maintenance costs
  • Estimate how long the equipment should last.

Once you have this information you can decide  which piece of equipment is the best to buy for the purpose, and what is the most sensible way to finance the the purchase (Cash Purchase, Hire Purchase, Finance Lease or Operating Lease).

Numbers can also help you decide which way is best to tackle other issues:

  • For a gardener we work with the best option for mowers was to buy 3 new ones each January.
  • In factories where piece work is used you have to time the rate at which a task can be performed. You can then  set a time for the task to be completed and a rate for the worker.
  • Under IR 35 if you pay someone by the hour or the day they are more likely to be deemed to be employees. This will attract higher costs in terms of tax and National Insurance.  If you pay them for a series of tasks via a business then they are less likely to fall under the regulations thus allowing the business to implement the best mix for achieving their objectives.

By expressing things in numbers you can clear away confusion and gain more clarity for making decisions.

For more information about the Hobby to Business course our associate Edward Tudor runs or about the workbook which has been designed to put new businesses on the right path please email Edward.tudor@hcbusinessadvisors.co.uk

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