This is not about creating a cashflow report for funding, its for analysing your current cashflow situation and rejigging things to make it work better.

Spread out your fixed payments
With cashflow, timing is everything. The smart entrepreneur knows this and records the dates when fixed bills are due to come out. Then he/she looks at the cashflow report. Everything hitting on the first of the month? We can’t have that. Make a few calls and change around payment dates so that they are spread out more evenly. Rent on the 1st, credit card on the 15th, subscriptions on the 23rd, etc. How does that help? Well, when you can’t pay your bills, its often a result of a knock on effect of someone not paying YOU. It’s a lot easier to call one or two customers to get money in for a 1,000 euro bill than to have to ring ten customers because 4,000 is hitting all at once. With one or two customers, you have time to make nicey pie, perhaps arrange a new business meeting, ask about the kids, etc. If your mind is on the next nine customers you have to ring, your desperation will come through and they’ll be off the phone quicker than you can say bankruptcy.  Be honest. Let them know you have a bill for X coming in, and if they could just tend to your invoice you would be most grateful and be able to stay in business and continue to provide your stellar product/service.

Get back on bi-monthly VAT Returns
The Revenue kindly switched some of us to six monthly VAT to ‘reduce our administrative burden’ but instead caused a cashflow nightmare. Whatever hope you had of calling round to collect money every two months for a reasonably sized VAT bill, a six month build up can reduce a grown man to tears. You do not have to stay on six months, call them up and say thanks, but no thanks please put me back on to two month returns.

Maximise your available credit
Time your purchases to get maximum credit. If you have 30 days credit with your supplier, try to buy at the beginning of your credit card cycle, to stretch that out to 60 days. If you find  that’s still not enough, transfer your balance to a zero balance transfer card. But set an alarm in your phone/google calendar  so you don’t go beyond the promotional period and end up with a whopping interest bill.

Arrange for part payment plans for both customers and suppliers.
Your customers probably have as messed up cashflow as you do. If you have some very overdue bills how about throwing both of you a lifeline, for example, “Ok Joe, how about you pay me 500 off your bill for now, just to tide me over?” They will very likely be most grateful, and you get 500 to pass onto to your supplier as they say, in good faith. I believe that everybody wants to pay their bills. Don’t you want to pay yours? Part payment arrangments make it more manageable, and keep the money circulating.

Make sure you have a system can handle part payments.
Yes, payment plans are a key cashflow strategy, however, if your backoffice system can’t handle this easily, part payments can be a nightmare to track. “Hi, this is Joe, I want to pay off a little more of that old invoice, what’s left over again?” Don’t be caught saying,”ah, hang on I’ll get back to you on that”. Joe’s largesse will be fairly shortlived, and you will be waiting until  his next ship comes in, which might be a long way from shore. Most accounts systems can handle this, as can SortMyBooks, but if you have been relying on Word for invoicing and spreadsheets for VAT, it’s probably time to trade up.

Finance Options
If you discover that you honestly have more going out than coming in, rather than just a cashflow issue, in kinder times I would have suggested do a term loan refinance with your bank, right now I am not exactly sure how feasible that is. I still have faith in the credit unions though, and if you dont have an account there, get one. Even if you only put in a little, once you are a member, loans are still given based on repayment capacity.

And as usual, a tool to help. Plot out your cashflow for the next six weeks and see if your problem is income or just cashflow and see where you can even it out.

If this has started to make you think about your finances in general, check out this post also: http://short.ie/salesproj

For a variety of reasons, the business structure of choice these days is a limited company. One of the perks of this is being able to claim standard rates for expenses, which means you get to write a regular cheque to yourself out of the company tax free. Hah? no tax? are you kidding? Yes I am, sort of. It just feels like that. Let me explain.

There are two ways to take care of travel, meals and accomodation expenses. The first way is to just keep all the petrol, restaurant and hotel receipts for every business trip, log them into your accounts and pay yourself back through the company, or even just use the company credit card to pay for everything. This can be very tedious after a time and if you are a sole trader I am afraid you have no other choice but to do it that way.

If you are a director or employee of a limited company however, there is a different, simpler, and usually more tax efficient way to deal with expenses.

Instead of keeping all those fiddly little receipts, you keep a record of your business trips. The record has to clearly show:

• the name and address of the director or employee;
• the date of the journey;
• the reason for the journey;
• the kilometres involved;
• the starting point, destination and finishing point of the journey; and
• the basis for the reimbursement of travel and subsistence expenses [e.g. an overnight stay away from an individual’s normal place or work].

Why it feels like tax free money, is because you may not actually spend €145 on accommodation, but for simplicity’s sake, a flat rate is used. You might have to go late one day and find yourself paying over €200, it evens out in the end. And €18 for lunch? Brown bag it from time to time and you will save tax.

Now here’s the kicker: for the mileage: YOU MUST PAY FOR EVERYTHING TO DO WITH THE CAR YOURSELF. You must pay for your own petrol, NOT with the company card, you must pay for your own car tax, mechanics bills, crash repair, loan repayments, insurance, EVERYTHING, do you hear me? Unless you do this, you will be in trouble for fraud.

For meals and accommodation: Same deal here! You cannot pay for a hotel with your company card, and then write a nice fat cheque for expenses. Some of you are saying, “Why is she telling us that, isn’t that obvious?” Hah I say, just wait til you are scrambling to reduce your taxes, the blindness will creep in around then, so go back to this blog and read it again. It’s definitely one of the few good deals around, just don’t abuse it!

So what exactly goes on the expenses sheet, and what doesn’t go on the expenses sheet?

Here is an example. I go to Dublin for the day. While I am there I buy a printer cartidge with my own money. My travel and accomodation go on the expenses sheet, my printer cartidge invoice goes in my VAT invoice folder. I reimburse myself for the printer cartridge by writing a cheque from the company for the exact amount of the cartridge, and putting it against the VAT invoice for the cartridge in my accounts. I can do that because it is an exact fixed amount, I know what it is and I have an invoice for it.

However, for my expenses, as I said, this is a notional figure based on per kilometre and overnight rates, which do not match the actual money that went out of my pocket. For this reason I have to maintain a separate log for my expenses. A sample of that log is in the spreadsheet below. Don’t be mixing up your mileage with out of pocket VAT reclaimable items you will only have to untangle it in the end.

Beware other forms of double dipping: We tend to use planes trains and automobiles to go to the capitol, you may too. It’s important that you log on the calendar how you made the journey.  For example, since we use the company card to pay for planes and trains, and if we have done that for a journey, we are not entitled to also claim the mileage.

Spreadsheet disclaimer: you need to verify the spreadsheet examples against that current going rates which you can find here:

http://www.revenue.ie/en/tax/it/leaflets/it54.html#appendix1 - for subsistence

http://www.revenue.ie/en/tax/it/leaflets/it51.html - for mileage rates

I hear the startups cry, “My company can’t afford this yet, so there’s no point.” Point, my friend. Do up the expenses sheets, and pay them out of your “Owner’s Funds” or “Director’s Loan” account in your accounts package. This will build up an amount of money owed to you that the company can pay you tax free when it can afford the cashflow. You will be a happy camper on that day.

Good habits - do your expenses sheet up every month. Sit in front of your Google calendar and AA route planner to figure out where you went and how many kilometres it was. Some directors like to save up their expenses for their holidays. That’s ok too, but log them in your accounts monthly anyway, building up the big cheque to come to you at some stage. It gives you a truer picture of your monthly profit and loss. You can play with the sheet here, if you like it, download it and work away.

Happy expensing!