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How you can avoid scratching for money to pay your wages and suppliers
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Have you ever experienced this?
Your accountant tells you that you’ve made a great profit but you have no cash
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Have you ever been confused when you went to your accountant?
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Do you wonder why they tell you you’ve made a huge profit and then wonder where the money’s gone?
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Do you wonder where money get’s stuck in your business?
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A key area where money get’s stuck in your business is working capital
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Do you know how much inventory you have?
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Do you know how much money is owed to you by your customers?
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Do you have a way of knowing what terms to give your customers so you don’t run out of money?
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You may have spent money on equipment or motor vehicles during the year and these amounts can NOT be deducted from your profit.
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This may explain where the money has gone.(Even if this was supposed to give a tax deduction)
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Buying Equipment and Vehicles is NOT covered in One Minute Business Checkup because most business owners are aware of these large items
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The area where money get’s slowly sucked into the business is working capital
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This is a part of the accounts that many small business owners don’t look at or understand
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Once you check your Money Flow measure you will clearly understand how money get’s stuck and what to do about it
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Let me show you how to check the Money Flow Measure in One Minute Business Checkup
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PROBLEM #5
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Inventory is too high.
How many days are tied up?
CALCULATIONInventory DIVIDED BY Annual Other Costs TIMES 365 = Number of Days
ANSWER$100,000 / $570,000*365 = 64 Days
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Let’s get days down to 45
45 Days / 365 Days * $570,000= $70,274
Original Inventory $100,000New Level $ 70,274Reduction $ 29,726
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$29,736 less Inventory45 Days
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Accounts Receivable are too high.
How many days are tied up?
CALCULATIONAccounts Receivable DIVIDED BY Sales TIMES 365 = Number of Days
ANSWER$150,000 / $800,000*365 = 68 Days
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Let’s get days down to 45
45 Days / 365 Days * $800,000= $98,630
Original Accounts Receivable $150,000New Level $ 98,630Reduction $ 51,730
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PROBLEM #5
$51,370 less A/c Receivable45 Days
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Checkout your own information now.
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Using the sandbox you can ‘play with the numbers’ until you get your Money Flow Measure correct
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Go to www.oneminutebusinesscheckup.com
and make sure you’ve got no excess money stuck in your business