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  • Your guide to breakeven analysis ¦ Welsby Associates
    of the business An alternative way of looking at this is â What gross profit needs to be made in order to meet the overheads of the business â Without achieving this minimum level of sales and gross profit no profits will be generated â the business will operate at a loss Breakeven percentage This shows the breakeven point as a percentage of the budgeted sales It is a very powerful â thermometerâ in assessing the â healthâ or risk of a business The following rule of thumb scale can be used for analysing the breakeven percentage over 90 suicidal 90 80 vulnerable 80 70 strong 70 60 very strong under 60 exceptional Note that a business with a breakeven percentage of over 80 is unlikely to receive an enthusiastic welcome from a bank or other funder Breakeven time The breakeven percentage projected can be converted into time For example a percentage of 88 equates to 10 56 months Therefore if a business starts its year on 1 January it will not be breaking even until 17 November This assumes that the sales levels are reached the gross margin is achieved and the overheads are on plan Not a very

    Original URL path: http://www.welsbyassociates.co.uk/breakeven_analysis.html (2016-02-15)
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  • Business tips: Produce a business plan and set objectives.
    on track behind or even ahead of their objectives It s like a Yachtsman sailing an ocean without a map or compass Christopher Columbus set out not knowing where he was going When he got there he didn t know where he was When he got back he didn t know where he had been and he did this three times in seven years If you don t want your business to end in failure you need to have a clear goal and then work out a plan that will help you achieve it Here are five reasons why good businesses make proper plans You need to understand which parts of your business are contributing what margin which could influence your spend on marketing and resources You are looking for external funding and need a business plan The better the p You want to compare your actual results with your expectations at the start of the year lan the better your chance of obtaining the support you need You are looking for a third party investor who may wish to take a share in the business Your plan will give the potential investor a good idea of whether your business is a suitable risk and provide an indication of when a return on investment is likely to be achieved You are looking to retire and sell the business within five years A business plan will show the potential buyer that is a viable concern without you and that it is being purchased and sold at a fair price In the next tip I ll be looking at the different ways you can increase your turnover For a free analysis of cash movements in your business please email me at gordon welsbyassociates co uk and let me help you take the

    Original URL path: http://www.welsbyassociates.co.uk/?p=1 (2016-02-15)
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  • admin | Part time Finance Director
    business They need information from their customers not data In challenging times that may inevitably lead to cashflow problems If so then talk to your bank manager at the earliest opportunity The sooner you talk to the bank the more likely they will be able to help Talk also to suppliers If you don t take action in good time you risk affecting your relationships with your bank suppliers and customers Tip Invite your bank manager for a quick meeting to update him on business progress Tell him your plans show him your latest monthly accounts but do this when you don t need anything from him Bank manager s are well connected and like to be kept up to date on progress and when they see a business that s organised and doing well they will often go out of their way to help sometimes sending new customers your way Help your bank manager to help your business In the next tip I ll reveal how to get the best out of your bookkeeper For a free analysi s of cash movements in your business please email me at gordon welsbyassociates co uk and let me help you take the first step to understanding your accounts Continue Reading Tip 7 How to see the wood from the trees customer s debts Published on 24 10 2011 by admin in Tips for Business 0 Everyone knows that the longer it takes your customers to pay you the worse your cash position will become However just because your debtors are high at the end of the month doesn t necessarily mean your debtors are taking longer to pay For example if your annual sales are 2 4m with debtors at 800k all this tells you is that you are owed 800k From these figures it is impossible to ascertain if this is good or bad news It does show that on average your debtors are taking four months to pay you However that may not be very useful information because your debtors may be high because you ve just had the best monthly sales performance of the year Therefore it is imperative to know the level of your debtors in the light of the actual sales you have made in recent months The best way to measure this is to calculate how many days of your actual sales are equal to the total of your debtors at the end of each month This is known as the Days Sales Outstanding Simply if the DSO is growing then your debtors are taking longer to pay and vice versa When businesses have a large number of debtors not all of whom are paying slowly it is helpful to analyse only those who are taking over say three months to pay An aged debtor listing can help establish the real position and enable those responsible for collection to become more focussed on the task in hand In one recent experience the aged debtor listing eventually revealed that virtually all the slow payers had been offered extended terms by the sales team in return for new orders Armed with this new information not only did the MD rule that in future extended credit could only be authorised by him but the sales team bonus structure was changed to be based on sales made less debts owed After all a sale isn t a sale until it s been paid In the next tip I ll be showing you how to get the best from your bank manager For a free analysis of cash movements in your business please email me at gordon welsbyassociates co uk and let me help you take the first step to understanding your accounts Continue Reading Tip 6 How to know where your cash has gone Published on 17 10 2011 by admin in Tips for Business 0 Businesses can be aware of the profits or losses they are making during the year However many business owners do not understand why their bank balance may have reduced even though their accountant tells them their business is profitable Very few business owners have a clear understanding of whether their business is generating cash or just consuming it It s crucial that you know the sources of the cash coming into your business and how these funds are being applied This information is not available from a cashflow statement yet is one of the easiest parts of a business to analyse if it produces regular profit and loss accounts and balance sheets Virtually all businesses need money continually revolving in their business to buy their stocks and fund their work in progress debtors and creditors These items are referred to as the working capital of a business If the stocks WIP and debtors increase then they will need to be funded from your bank account If they fall that will mean that money is coming into your account The opposite is the case with creditors if your creditors are rising this means that you are using your creditors funds if they are falling you are paying more out of your account In the next tip I ll be looking your debtors and how to see the wood from the trees For a free analysis of cash movements in your business please email me at gordon welsbyassociates co uk and let me help you take the first step to understanding your accounts Continue Reading Tip 5 How to decide whether to increase or decrease prices or offer discounts Published on 10 10 2011 by admin in Tips for Business 0 Do you believe that raising prices will turn customers away Do you think that dropping your prices will bring a flood of new customers Do you think that either will make your profits soar The truth is reality can be very different For example a 10 price increase on a gross profit margin of 30 will mean that you could afford to lose up

    Original URL path: http://www.welsbyassociates.co.uk/?author=1 (2016-02-15)
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  • Business tips: Three ways to increase your turnover
    How to increase turnover Tip 2 How to increase turnover Published on 12 09 2011 by admin in Tips for Business 0 There are three ways to increase turnover Increase your customer base Increase your prices Increase the frequency of when customers buy from you If more than one of these takes place then turnover growth is exponential For example if your business could achieve an increase of just 10 in customers prices and frequency of purchase then turnover would be up by 33 However by increasing customers prices and frequency of purchase by 50 turnover increases by an incredible 238 In any business the importance of effective pricing cannot be underestimated In the next tip I ll be looking at how you can make your accounts into something you WILL want to read For a free analysis of cash movements in your business please email me at gordon welsbyassociates co uk and let me help you take the first step to understanding your accounts Leave a Reply Click here to cancel reply Type your comment here Which format would you like FREE PDF version FREE Booklet by post Tips for Business Tip 1 Plan Ahead Paying business mileage to

    Original URL path: http://www.welsbyassociates.co.uk/?p=235 (2016-02-15)
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  • Business tips: Understand what your accounts are telling you
    they reveal In other words you need information and not data presented in a way that makes sense for your business There are a number of key measures often called Key Performance Indicators you need to know and they will vary depending on the type of business They may include 1 Stock turn important for business holding resale stock 2 Days sales outstanding important if you offer credit to customers 3 Occupancy rates important for hotels restaurants Ideally this information should be produced at least monthly All too often businesses only gleam information in their annual accounts often produced nine months AFTER year end At this stage the information is historic and of little use for effective planning Limited companies are required to prepare and file annual statutory accounts However monthly management accounts will give you real information about how your business performed over the last month and indeed every month in your financial year These should be checked back against the annual budget to see if the business is on track to achieve its objectives Your management accounts should be customised to reflect how your business works for example 1 Are there types of sales than need to be shown separately 2 Do you know the cost of sales for these sales analyses 3 Are overheads shown by your departments or locations In addition to monitoring financial criteria there are other non financial measures to consider Numbers alone can t give you the full picture Performance graphs over time will show trends month by month which are particularly useful if the business is seasonal or has predictably different months for trading in for example August and December In the next tip I ll be looking at the eight simple steps you can take to boost the cash in your

    Original URL path: http://www.welsbyassociates.co.uk/?p=238 (2016-02-15)
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  • Business tips: Review your pricing regularly
    customers After all won t their customers all go elsewhere to by the products or services that they sell In fact this is the only case with commodities where you are selling the identical product or service to your customers Maybe your product service comes with extra such as quality speed of delivery expertise or other intangible but very important benefits All businesses must make a gross profit or margin when they make a sale This margin is expressed as a percentage of the selling price If you sell for 100 and buy for 70 then your gross profit is 30 and you have a 30 margin out of which you need to pay your overheads The effect of a price increase made by a business will depend upon what margin it makes when it trades The following table will clarify this This table shows a business what proportion of its customers it can afford to lose if it increases its prices If we assume that a business is operating at a gross margin of 30 and wishes to increase it prices by 10 Then it could afford to lose 25 of its customers without a detrimental effect on the

    Original URL path: http://www.welsbyassociates.co.uk/?p=331 (2016-02-15)
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  • Business tips: How to successfully manage your cashflow
    eight simple steps to boost your cashflow Aim to Invest rather than Spend When you buy a product or service from a supplier think about whether you are making an investment in the business or just spending money Being aware of the difference should make it easier to eliminate non essential purchases Choose your fixed assets carefully Many businesses need fixed assets in order to operate for example premises machinery vehicles etc Before making a purchase find out if you can buy it second hand and save money However ensure you are not just deferring spending on repairs and maintenance to a future date Consider financing fixed assets through leasing to avoid the heavy initial outlay Measure your stocks and work in progress Stocks Do you have too much stock in your business How much is slow moving even worse obsolete Do you know what the stock turn of your business is If not start measuring it now Remember for every 1 000 of stock you have that is 1 000 less cash in your bank account Work in progress in service based businesses If the service is provided over a period of time then before the invoice is raised for the work there will be uninvoiced work that has been done work in progress The smaller the value of work in progress then the more cash there will be in your bank Consider asking for deposits in advance or payments on account Curb bad debts quickly collect money due from customers Before you make a sale to anyone try to get payment up front or on delivery If you have to offer credit terms ensure you run a credit check on your customer Ensure your credit terms are written down clearly and signed by both parties Gain understanding that

    Original URL path: http://www.welsbyassociates.co.uk/?p=241 (2016-02-15)
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  • Business tips: How to successfully manage your cashflow
    to be paid at the end of the month after the invoice was raised then don t pay it until then Your supplier isn t expecting it until then For every 1 000 that is paid early that is 1 000 that is not in your bank account Delay payments if you can try to negotiate with your supplier however certain creditors should always be paid on time HMRC being the most obvious PAYE NI and VAT 6 Get the best return for your cash If you have money in the bank you need to ensure you are getting the best return possible If you are operating an overdraft you will be charged interest by your bank for every day you are overdrawn Following the above steps will ensure that your overdraft is kept as low as possible 7 Monitor monitor monitor When you drive a car you regularly monitor all the information displayed on the dashboard and in the mirrors You should operate your business in the same way by regularly monitoring the important Key Performance Indicators in your business By developing your business dashboard you will remain in the driving seat of your business 8 Don t stick your head in the sand Don t be a financial ostrich If you are in any sort of financial crisis find out what is causing it It may not be the obvious answer Prioritise the steps you need to take by speaking to key customers you may be able to negotiate more favourable terms for a while When a supplier does not get answers from an overdue creditor they are far more likely to stop supplying In addition ensure your business chases all the overdue debtors In the next tip I ll be looking at the dramatic effect pricing can

    Original URL path: http://www.welsbyassociates.co.uk/?p=243 (2016-02-15)
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