The Blog

Amongst the various financing and cash injections available; The Coronavirus Business Interruption Loan Scheme (CBILS), The Bounce Back Loan (BBL), Business Rate Grants

Etc. We look at other key factors besides loans and grants to help support and enhance company cashflow.

Variable costs.

Drilling down on all variable costs incurred tends to be a more effective way of reducing cash outflows quicker as compared to reducing fixed costs.

Where available, converting fixed costs to variable costs whilst maintaining the core of the business –such as contract manufacturing, transportation fleet leasing, and third-party warehousing.

Releasing Equity.

Selling assets and then leasing them back is one way to raise emergency cash.

Although, for most businesses this is not something that can be reviewed and agreed overnight with cash received imminently, it could be vastly important to the cash flow over the long-term depending on how long both the demand and supply chains continue to be disrupted by COVID-19 (You can also expense the lease costs on your business taxes.)

Insurance – Business Interruption.

Everyone with a business insurance policy (prior to COVID-19) should review and understand what they are protected and covered by in terms of business interruption.

Normally, insurance policies will cover losses as a result of disruptions to suppliers or customer based issues.

Although, due to the losses incurred by insurers due to the SARS epidemic some insurers have specifically excluded the coverage of company losses resulting from epidemics and pandemics.

Capital Investments.

Consider what is truly necessary for the immediate future, can any capital investments already planned and agreed be postponed until normal business resumes? As working life has changed dramatically over the previous months, perhaps previously discussed capital investments should be reconsidered? Extending on the point of dramatic changes to working life, what capital investments should be prepared and ready for the business rebound creating competitive advantage.

Adaption

Even if your business isn’t in one of the sectors given no confirmed dates to open its doors again, there may be limitations on continuing what was the main revenue stream.

Consider ways which can temporarily run alongside or perhaps even one day replace what was the main revenue stream, which has been demonstrated by Louis Vuitton owner LVMH as they will use their perfume production lines to start making hand sanitiser.

Vat Deferral

VAT registered businesses that have a VAT payment due between 20 March 2020 and 30 June 2020 are able to defer paying their VAT liabilities during this period.

The liability must be paid to HMRC on or before 31 March 2021 and HMRC will not charge interest or penalties.

No application is required to defer VAT payments however, VAT returns should still be submitted to HMRC on time.

Businesses will simply not pay the VAT liability due in the deferral period.

What do you want from your Finance Director & Ops Consultant…?

Successful businesses often grow quickly. There are commonly leaps in evolution which inevitably not only create a trail of organisational chaos but leave best intended systems and processes somewhat redundant and unscalable. There is a tendency to be overly focused on sales and businesses often over-look or rather turn a blind eye to the weaknesses that lurk in the back-end infrastructure of their company operation. The impact of such weaknesses cause unnecessary stress, inefficiency and unfortunately will inevitably result in the loss of revenue. At this stage, businesses frequently do not have capacity to tackle the problems on their own and rely on financial and operational professionals to step in to identify the issues and help find sustainable solutions.

When shaping our service offering, we thought considerably on the types of difficulties businesses face as the grow and change, and how we can aid this process most effectively. There are many credible consultants out there who can work alongside business owners and their teams to analyze the pitfalls in processes, make sound judgements and offer very appropriate advice. The problem with this is that after being presented with the scope of what lies beneath and what needs to be done, the business is faced with the challenge of implementing the strategy using there own limited capacity or trying to pass the plan on to a third party who doesn’t necessary understand the background to the brief and the ins and out of the company.

A One Stop Shop….

We feel to offer a service in which the value is really felt, it is hugely effective to be able to support the client every step of the way during this process. After all, change is unnerving and it is unlikely businesses can facilitate this alone. Our complete approach to our consultancy follows through with the implementation of the recommendation and thorough project management from start to finish. Our services start at identifying areas of operational improvement, recommending a suitable solution, then project managing the necessary changes, and continuing to maintain the systems and processes put in place to ensure they are happily bedded into company culture and producing the desired outcome.

This approach has been taken with many clients who have encountered issues with their financial management, whether it be not being able to get the reports that they want or that they are using up too much resource on doing lengthy manual procedures. Our focus has always been on getting the most suitable and reliable solution in place with the minimum disruption to workflow. This can often be as streamlined as switching accounting software and adding new expense procedures. Its incredible how these seemingly small steps can have such an impact on productivity and ultimately on profitability. The key here is that we have not only worked with the business to decide on the most appropriate solution, we have designed the implementation plan around them, actioned it and then been able to offer the ongoing financial director support to ensure the continued function whilst maintaining a close relationship & communication throughout the entire process.

We know growing a business can be tough and day to day operational management can be un-motivating. We hope to create solutions and support that will continue to help propel our clients into an easier, more efficient and sustainable way of operating which will enable them to focus on the parts of the business they most enjoy!

The quote “turnover is vanity, profit is sanity but cash is reality” couldn’t be more the truth than when applied to small businesses. Cashflow is the life blood of a company. Without working capital companies can quickly become insolvent. Being able to invoice customers and get paid timely is a critical part of keeping cash positive and businesses trading. We give our advice on utilising latest technology to aid the debt collection process and ensuring small businesses remain operational.

Defining the terms

Making a sale of your product or service, especially in the early days of your business, feels like a massive achievement in itself. At this stage, it’s easy to forget the finer details of the terms of your agreement. Making sure the expectations regarding invoicing timelines, payment terms and payment methods are clear from the outset is crucial to ensure the process continues to run smoothly. It’s also important to understand how your clients’ processes work, for example do you need to include their purchase order reference on your invoice so you get paid; is there a specific email address your invoice should be sent to; what is the correct billing address etc. Having all the vital information will speed up your ability to ensure the invoice is not only issued to the agreed terms, but your client can effectively process your payment timely.

Automating the workload

At Advisory Gems we ensure we work with the latest technology to automate the debt collection process. Through research and discovery, we now use a software called Fluidly which sync’s with our clients’ cloud based Accounting Software. Fluidly gives us a great overview of our cash collection activities. From the system we can automate invoice reminders, applying custom settings and messages. Statements and overdue notifications can be emailed out on an individual invoice basis or in a multi reminder when customers have more than one invoice falling due in the same time period. Actions, notes, promised payment dates and disputes can also be added to the system which make it a perfect tool for multiple team member collaboration on the task and allows users to obtain all the information regarding a specific invoice or client from one centralised place.

Utilising a system like Fluidly to its full potential saves a lot of time chasing customers manually for payment and removes the hassle of remembering when client’s invoices fall due. We have found customers have also been more likely to pay according to terms, improving the business’s overall cashflow due to the pre-reminders we have been issuing. Having the system in place has allowed us to focus our attention on the genuine non-payers and invoices in query, freeing up our time to resolve these matters and keep the funds flowing into the business.

Predicting the future

Accounting is constantly changing due to technological advancement. What we love about Fluidly is not only has it automated the credit control process, it is able to predict future cash collections using Artificial Intelligence (AI). The system provides valuable data insights to help understand payment terms on the invoices as well as our customers’ historical payment information. This in turn provides a view of ‘predicted’ incoming cash on a weekly basis all from a centralised dashboard, enabling easy planning of business expenditure.

We can look to the future knowing that AI will be more widely adopted in accounting as in all industries, removing the finance professionals from these time consuming and highly repetitive tasks to focus on the added value they can bring to an organisation.

This week we spent some time speaking to our Founder, Gemma Shayle to hear more about a typical day for her at Advisory Gems and finding out a little more about the business.

Please describe what your role involves?

My role at Advisory Gems is to support and lead the finance and operational functions of our clients who are all small businesses in the software / technology industries.  Our clients are typically SaaS and online marketplaces based within London.

We work with high growth businesses to ensure they have robust systems and processes across their business to scale effectively. 

As Consultant Operations Director a lot of my time is spent accessing the business model of our clients, coming up with the appropriate solutions and implementing them across the company.  This is normally done in close conjunction with the CEO/Founder of the business and their wider team as needed.

What kind of skills do you need to be effective in your role?

My role involves capturing a lot of (mainly) complex information and finding solutions to problems a business is facing today as well as predicting the issues they are likely to face as the company accelerates growth and ensuring the infrastructure is robust to meet these demands. 

Therefore, problem solving, business intelligence, forecasting and process implementation are key skills required on a daily basis.  As my role involves close collaboration with business owner’s communication skills are also vital as well as strong technical knowledge.

What are your favourite tools to assist you in your role?

Advisory Gems works completely in the ‘cloud’ making collaboration and accessing information as efficient as possible.  Day to day as a team we rely on a number of cloud-based systems and tools which we often implement to meet our client’s needs. My favourite collaboration tool is Slack as it an easy way to aid quick communication.

How did Advisory Gems start?

I started Advisory Gems after the sale of an Online Marketplace I was working as Chief Operating Officer for back in 2014.  I was suddenly approached by other tech companies who required a Finance and or Operations Director on a part time flexible basis.  When I started working with these companies I could see an immediate need for this service and it went from there starting an outsourced Finance department solution.  

How has the company developed it’s service offering?

Initially we were just providing a outsourced flexible finance function for clients, as demand has grown we then added the operational business support services to provide a fuller all round solution.

What do you love about your role?

I love the variation of the workload assisting through our client base as Finance and or Operations Director.  Every day is different, interesting and there is always a problem to be solved! I consider myself very fortunate I get to work daily with impressive company Founders, their teams as well as managing our wonderful internal team here at Advisory Gems

What does the future hold?

We are always looking for interesting clients to work with to provide them with a finance and or operational function on a flexible basis.  We also complete a wide range of one off projects such as system integrations, migrations and new business set up services.   Automation and efficiencies is a large part of our offering as we continue to see technology advancements I see this becoming a larger part of our business support services

The Government is introducing Making Tax Digital (MTD) from 1^st April 2019. This initiative will effect UK businesses with a turnover above the current VAT threshold limit of £85,000 per annum which is reported at 89% of all UK businesses.

The new legislation will require these businesses to store their financial records digitally and submit VAT returns directly to HMRC via compatible accounting software. The initial pilot began in October 2018 and is mandatory from 1^st April 2019.

To prepare for this change businesses will need to have an accounting software in place and all financial records correctly processed.

At Advisory Gems we can implement this for you and ensure you are ready for the change. If you would like some assistance please contact us at hello@advisorygems.com

Our Founder Gemma, meet’s with new Limited Company Directors on a regular basis to provide financial advice and support in those crucial early days of setting up an exciting new venture! Common questions we are asked are ‘what are dividends’ and ‘are we eligible to take dividends’

What are Dividends?

Dividends are a distribution of company profits to its Shareholders. To pay dividends the company need to have sufficient retained earnings.

What are Retained Earnings?

Retained earnings are the accumulated earnings by a company since it was formed (registered with Companies House). It’s common for many start-ups to make a loss when the company first begins therefore, there are no profits to distribute for dividends. The retained earnings are considered ‘negative’ in loss making businesses.

When are the Retained Earnings ‘Positive’?

Once the Limited Company begins to make a profit (after corporation tax) the retained earnings will start to rise until a profit is generated. These funds after tax will be available for Dividend payments to the Shareholders, based on your companies Shareholding and Shareholders agreement of how they are to be distributed.

Do Investment funds count towards Retained Earnings?

No, investments funds are the purchase of company shares. This is equity into the business and not earnings of that business from trading activities. Investment funds will show on the Balance Sheet rather than the Profit and Loss Statement.

Require Assistance?

Advisory Gems Limited work with start-ups and small businesses to provide a range of financial and operational services. You can find more information via our Services Page.

If you would like a free non-obligation phone call of your specific requirements, please contact us to arrange a time. Look forward to connecting with you!