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Cash flow and profit improvement
We go through your figures with you, find where cash is tied up and where profit is being lost, and agree a 90-day action plan you can start on straight away.
Run by Andy Jackson and Peter Allen · AAT licensed · ICPA member · FreeAgent and Xero partner
- Where cash is tied up
- Where profit is being lost
- The tactics chosen for each of the five levers
- A 90-day action plan with dates on it
The five levers
We work through all five on your own figures, starting with the one that adds most to profit.
Price
A price rise carries no extra cost, so every pound of it adds to profit.
Cost of sales
Supplier terms, waste, buying patterns and the discounts you have not asked for.
Debtor days
Collecting faster frees cash, and needs regular attention to the aged debtors report.
Overheads
Where most owners start, and usually the smallest difference of the five.
Volume
Selling more on a thin margin adds work without much profit, so it comes last.
What 1% is worth
A business with £500,000 of sales, a 45% gross margin and £180,000 of overheads makes £45,000 of net profit.
Putting prices up 1% adds £5,000 to profit, more than twice what 1% more sales adds. The meeting runs the same arithmetic on your margin and overheads.
Added to net profit of £45,000
| Prices up 1%, same volume | +£5,000 |
| Cost of sales down 1% | +£2,750 |
| 1% more sales at the same margin | +£2,250 |
An illustration on round numbers. Every figure is invented.
Why profitable businesses run short of cash
Slow-paying customers
On £500,000 of sales, every day of debtor days ties up about £1,370. Getting from 62 days to 45 releases about £23,000.
Too much stock
Money spent on stock is tied up until it sells, and stock grows when nobody is responsible for it.
Growth
Stock and wages are paid before the invoice is. A business growing fast on thin margins can be profitable and run out of cash.
Tax in the current account
VAT and PAYE you collect belong to HMRC. Move them to a separate account on the day they come in.
What to have ready
- Your last set of accounts
- Figures for the current year, if you have them
- An aged debtors list
- Sales split by product, service or customer, if you can
If the bookkeeping is badly behind, say so when you book. The meeting can work from the last filed accounts, and the findings will be broader.
Questions about the meeting
Where does the profit usually go?
Usually one of four things: prices that have not moved while costs have, gross margin drifting by product, job or customer inside a blended figure, overheads that have built up without review, and discounts or extra work that never reach an invoice.
Where does cash usually get stuck?
Invoices raised days or weeks after the work is done, payment terms nobody enforces, old debts left unchased, stock or work in progress sitting too long, and supplier terms nobody has asked to improve.
What happens after the meeting?
Some owners act on the plan themselves. Others find nothing is measured monthly and move on to Business Pulse, financial coaching or a finance team to keep the picture current.
Do I have to be a Buzz Accounting client?
No. You can keep your own accountant.
Talk to us
Tell us about the business and which level you are looking at, or book a 30-minute call.
Book a callOr call
07476 989568Accreditations and partners
