As we look ahead, we have asked visitors to our website where their areas of focus will be this year. Though there have been varied responses, at the end of the day, every business is looking to improve their bottom line. With this in mind, we have chosen to provide an article to help that focuses on five different ways to accomplish this task.This article is longer than most, so we have provided this one article to provide support to business owners looking ahead.
Increase Working Capital and Improve Cash Flow
To increase your working capital in your business and improve your cash flow, you need to have a good handle on your financials. Cash is "King", so it is important to be able to manage correctly the financials outlined below with relationship to your business.
What is in your bank account is not what is available to spend and if this is something you do, it can have serious repercussions if you do not know what receivables are outstanding and what payables are due. If you have to pick and choose who to pay each month, this means you are not generating enough cash to cover your expenses. In this case, your only option is to reduce expenses and / or increase revenue. Here are some tips in order to improve your cash flow that will in time increase your working capital.
Productivity is defined as the good output measures with respect to inputs supplied. In the case of employees Productivity rate = hours billable/hours paid. If you find you are paying your employees for more hours than you can charge out for in labour - this is a problem. A business that is functioning at over 75% is good, if you are under 50%, this is a problem area. This is especially true in services and labour intensive industries such as manufacturing. Here are some areas to look at in your business.
Code Your Transactions Properly
Most business owners do not consider how their transactions are coded in their financial system, such as QuickBooks. This is where paying for an experienced bookkeeper and involving your accountant in your business can save you money in the long run. Here are some tips to keep in mind to keep more money in your pocket instead of CRA.
Pay Your Taxes When They Are Due
There are three levels of taxation for a business which include Income Tax or Corporate Tax depending on the business type, HST for Provinces that have harmonized Tax, and Payroll Taxes. In some Provinces, there will be PST and GST instead of Harmonized Tax. Most businesses and business owners that in trouble with CRA, for the most part, is usually due to non-payment of HST (or PST/GST equivalent) or Payroll Taxes, as these taxes are paid on a monthly basis. For these taxes, you are acting as an agent of the government, and the cash you collect belongs to CRA. Here are some points to keep in mind moving forward.
Many times we here from business owners that they believe a budget is constraining and will not allow them to spend. We are of the opinion, instead, that it will set you free. If you do not have a budget, how can you figure out what is going on in your business if you have nothing to compare it to, as we do not find many business owners that look at their profit and loss in detail on a monthly basis. If you have a budget, and things are going well in your business, it will help you maximize your opportunities. If you do not earn the profit expected, it will allow you to zero in on the specific line item that is out of line rather than reviewing transactions in detail. A budget will help you manage your business appropriately instead of worrying about whether you have the money to spend on items such as marketing to generate more sales.
We hope this article helps provide you some guidance in looking forward and provides points you can use in your business to help you improve the bottom line in your business.
RK Fischer & Associates