Bonanza Banana Cake

I have to confess to loathing bananas, but to loving Banana Cake that is covered in Lemon Icing. This is a wonderful banana-ery Banana Cake, which kids – big and small – will love. So, take time out of your schedule and head to the kitchen and bake. You won’t regret it.

What you need for the cake

125 grams softened butter
90 grams sugar
2 eggs
3-4 over ripe mashed bananas
1 teaspoon baking soda
2 tablespoon hot milk
270 grams plain flour
1 teaspoon baking powder

What you need for the icing

200 grams softened butter
500 grams icing sugar
1-2 tablespoons of very hot water
Grated lemon rind from 1 med/large lemon
Lemon juice to taste (about 2 tablespoons)

How to make

Cream butter and sugar together until a pale cream colour. Add eggs one at a time and beat into the butter and sugar until well mixed together. Add the mashed bananas and mix very well. Stir the bicarbonate of soda into the hot milk until frothy, then stir into the banana mixture. In another bowl, sift the flour and baking powder.

Add to the banana mixture, then carefully stir/fold into the mixture, being careful not to over stir or you will end up with a heavy cake with no air in it.

Pour into a ring shaped baking tin or 20cm round tin which has been greased with butter and lined with baking parchment paper.

Bake in a preheated oven at 180°C (350°F) for approx 50 mins or until a skewer is pulled out of the cake clean. Remove from the oven, and leave in the tin for about 5 mins before turning out onto a cooling tray. Leave until completely cold, then ice with lemon icing.

To make the icing, beat the butter and icing sugar until very smooth and pale, add the lemon rind, then the lemon juice to taste. If the icing is too thick for your liking, add a little hot water to soften (just a little at a time though).

Kids love this cake, so get them around the table with a glass of water each, and a large wedge of cake. Enjoy!

Other Delicious Delights

Death by Chocolate Cake
Classic Carrot Cake
Rocky Road Cookies for Summertime Fun
Pavlova Perfection

Classic Carrot Cake

For me, baking is a great way to take time out from the office. It’s “me time”! Plus I get great joy from seeing friends and family eat my cakes, and at times, faster than the speed of light. So, take time out from your schedule, head to the kitchen and bake this classic Carrot Cake this weekend. It tastes fab-u-lous!

What you need for the cake
125 grams self raising wholemeal flour
270 grams plain flour
360 grams castor sugar
1 level teaspoon salt
1.5 teaspoon bicarbonate of soda
1 teaspoon cinnamon
250 grams undrained crushed pineapple (from a tin)
400 grams grated carrot
4 eggs
375 ml vegetable, sunflower, rapeseed oil (note: do not use Olive Oil)

What you need for the cream cheese icing
160 grams cream cheese
2 tablespoons soft butter
250 grams icing sugar

How to make

Sift flours and place into a large mixing bowl. Add sugar, salt, bicarbonate of soda, cinnamon. Mix all together. Add pineapple, carrot, eggs, oil and vanilla. Beat with a large spoon until well combined.

Spoon the mixture into a greased 24cm (approx) baking tin that has been lined with baking parchment. Bake in a pre-heated oven at 180°C (350°F) for approx one hour or until a skewer is pulled out of the cake clean. Remove from the oven, and leave in tin for about 5 mins, before turning out onto a cooling tray. Leave until completely cold then ice with fabulous cream cheese icing. To make the icing, add all the ingredients together and beat until smooth.

Now make a cup of tea or coffee and eat this fabulously moist carrot cake and enjoy!!

Other Delicious Delights

Death by Chocolate Cake
Bonanza Banana Cake
Rocky Road Cookies for Summertime Fun
Pavlova Perfection

How to Solve Cash Flow Problems: Inventory Turn

Effectively managing inventory is critical when asking “How do I solve my small business cash flow problems?” In many respects inventory is like cash. Sell the inventory and you have cash (once the accounts receivable is paid). Having too much inventory in the warehouse or having inventory that is not selling, is going to have a major impact on cash flow, as you have spent money buying the inventory, but it is sitting there doing nothing. If it is not selling, it is as good as wasted cash!

So, how to solve cash flow problems? Focus on actively managing your inventory turns.

In accounting terms, we have a little formula called the ‘Inventory Turn’ which helps businesses to effectively manage their cash flow. The Inventory Turn formula is calculated as:

Inventory Turn = Cost of Goods Sold / Average Inventory

Average Inventory = Beginning Inventory + Ending Inventory / 2

Inventory Turns can be worked out for any period – a year, six months, quarter etc. Whatever suits the business. Often it is helpful to calculate multi-period Inventory Turns to ensure the result is consistent across a longer period.

Let’s look at an example. If the cost of goods sold for a year is $200,000 and the average inventory is £50,000 then the Inventory Turn is 4, which means the inventory is ‘turning over’ or being sold, on average 4 times per year over every 91.25 days (worked out by dividing 4 by 365 days in the year).

Inventory Turns differ in industries, so it is important to look at what the industry norms are for your industry. Perhaps you accountant might be able to assist you in providing that information. Equally, industry associations often hold that type of information.

So how does Inventory Turn help to answer the question, ““How do I solve my small business cash flow problems?”

As I mentioned earlier, if you have a lot of inventory sitting and not being sold, that is effectively wasted cash or dead cash, as you have paid for the inventory. It is important to be turning your inventory as often as is suitable for your industry. Whereas a high inventory turn might be suitable in the grocery trade, it will be low in the luxury car market, for example.

Also, it pays to look at the composition of what stock is selling and what is not, as the ‘devil is in the detail’. Some inventory may be turning over quickly, whereas other stock may not. It is important to look beyond the numbers to actually see what stock is selling.

Slow moving stock may be obsolete or damaged, and therefore chewing up cash. In that instance, it is best to ‘fire sell’ it if possible to release the cash, rather than throwing the inventory away at some future time.

If you would like to learn more on how to address the cash flow issues in your business, then please go to www.adelemclay.com/free-resources and download my SPEARHead System™ – 50 Strategies For Supercharged Small Business Cash Flow.

Could some guidance from me be helpful to you? If so, please arrange a free 30 mins Skype strategy meeting with me. Here’s my calendar to book a meeting. I’d love to support you in some way to gain ‘seductive clarity’ in any aspect of your business or life.

Other articles on Small Business Cash Flow:

Small Business Cash Flow – The Ultimate Guide
Cash Flow Problems in YOUR Small Business
Small Business Cash Flow Problems
Cash Flow in Business
Cash Flow Projections – Important in Business?
Projected Cash Flow – Relevant in Business?
Small Business Problems: Why are YOU in Business?

Cash Flow Projections: Important in Business?

The term ‘cash flow projections’ is used interchangeably with the words ‘cash flow forecast’, ‘cash flow management’, ‘cash flow planning’ to name a few. Essentially they all mean the same thing; planning, forecasting or projecting the cash that is going in and out of the small business during a period. That period could be annually, monthly, weekly, or daily. It depends on the business.

Importantly, cash flow forecasting /cash flow projections are critical to success in any business. Cash flow forecasting is a business tool that all small business owners/entrepreneurs must engage with to effectively manage the success of their business. Failure to understand cash flow within a business, and the business becomes vulnerable and out of control. Cash is King (or Queen) in business. Profit is important, but it doesn’t pay the wages and the bills. It is cash that does that!

Many entrepreneurs manage their business from one cash flow crisis to another, simply due to poor or no cash flow projections (or cash flow forecasting) having been done in the business. I think many small business owners are frightened of ‘the numbers’ in business, or don’t want to spend the money asking their accountant or book keeper to do the work for them, or they don’t spend time working ‘on’ their business, preferring to work ‘in’ the business, working within their comfort zone.

Cash flow forecasting is done in all large businesses around the world with incredible accuracy. In fact it is so important to large businesses, that they have large teams of finance and treasury staff managing the cash flow on a daily basis. For example, a very dear friend of mine is a senior finance executive in a multinational business. She knows the daily cash balance and the net in and out flows to the business down to the last dollar, as they manage cash flows that carefully in the business, given its importance to the business.

While small business is not of that scale, it is similarly important as small business owners are responsible for paying staff (often) and they have monthly business expenses to pay. Consistently not being able to meet its financial obligations could well result in the business failing, and staff, who depend on the business for their income, being made redundant.

For many small businesses, cash flow forecasting is not difficult to do, by virtue of the fact they are small businesses. Cash flow projections templates can be freely downloaded from the internet and used to accurately plan for cash flow within the business. As well, many accounting systems can ‘spit out’ cash flow forecasts as a report, so long as the correct information has been put into the system when the accounts receivable or payable was entered into the accounting system in the first place, and so long as the book keeper or accountant includes all other accounting transactions that have a cash flow impact.

There are two steps to cash flow forecasting or cash flow projections. The first is to forecast/project the money the small business expects to receive in cash and pay out on any given day/week/month (if managing daily/weekly/monthly), starting with an opening balance of cash in the bank (or overdraft amount), on day one. Secondly, at the end of the period the business needs to re-forecast the cash flow based on what actually happened in the business, so that the small business owner has an accurate account of cash flow at all times.

For instance, let’s say an account of $10,000 is due to be paid by a customer on 20^th of the month, and is put into the monthly forecast as such. If the customer doesn’t pay on that date, at the end of month the small business is going to have $10,000 less in the bank than it predicted, and that will potentially have an impact on what expenses can be paid at month end. Therefore, the cash flow needs to be re-forecast at the end of the month to allow for the late arrival of the $10,000 into the account and late payment of business expenses. This exercise happens on a monthly cycle, as cash flow projections or forecasts are just that, projections or forecasts. They are not accurate day to day unless they are updated daily.

It might seem like a lot of work, but it is necessary work for a small business. However, it should be delegated within the business, so the small business owner can continue working in the business, and simply reviewing the cash flow information that is provided to them. With that information, it is likely that customers will need to be chased up for payment of their accounts if they are late in paying, or creditors may need to be spoken to about delaying their payments if there is not enough cash in the bank.

Information is power. Cash flow projections/cash flow forecasting provides information on which to act. So, how about it? How about arranging a meeting with your accountant or book keeper to seek their help in preparing cash flow projections for your business, so you maintain control of it!

Other articles on Small Business Cash Flow:

Small Business Cash Flow – The Ultimate Guide
Cash Flow Problems in YOUR Small Business
Small Business Problems – Why are YOU in Business?
Small Business Cash Flow Problems
Cash Flow in Business
Projected Cash Flow – Relevant to Business? How to Solve Cash Flow Problems: Inventory Turn

Projected Cash Flow: Relevant in Business?

The term ‘projected cash flow’ is used interchangeably with the words ‘forecasted cash flow’, ‘management of cash flow’, ‘cash flow planning’ to name a few. Essentially they all mean the same thing; planning, forecasting or projecting the cash that is going in and out of the small business during a period. That period could be annually, monthly, weekly, or daily. It depends on the business. So, is the concept of projected cash flow relevant for small business entrepreneurs?

The short answer is YES!! A projected cash flow statement is the saviour of business, and is critical to success in any business. Cash flow projecting is a business tool that all small business owners/entrepreneurs must engage with to effectively manage the success of their business. Failure to understand cash flow within a business, and the business becomes vulnerable and out of control. Cash is King (or Queen) in business. Profit is important, but it doesn’t pay the wages and the bills. It is cash that does that!

I think many small business owners are frightened of ‘the numbers’ in business, or don’t want to spend the money asking their accountant or book keeper to do the work for them, or they don’t spend time working ‘on’ their business, preferring to work ‘in’ the business, working within their comfort zone.

Projected cash flow statements are important as small business owners are responsible for paying staff (often) and they have monthly business expenses to pay. If a small business is not consistently able to meet its financial obligations, the business could fail, and staff, who depend on the business for their income, being made redundant.

For many small businesses, projecting cash flow is not difficult to do, by virtue of the fact they are small businesses. Templates that help in creating projected cash flow statements can be freely downloaded from the internet and used to accurately plan for cash flow within the business. As well, many accounting systems can automatically prepare cash flow projections, so long as the correct information has been put into the system by the data entry team.

Projecting cash flows might seem like a lot of work, but it is necessary work for a small business. However, these administrative tasks should be delegated within the business, so the small business entrepreneur can continue working in the business, and simply reviewing the cash flow information that is provided to them. Armed with a projected cash flow statement, the entrepreneur can then work ‘on’ their business and direct action that needs to occur to improve cash flow. For instance, it is likely that customers will need to be chased up for payment of their accounts if they are late in paying, or creditors may need to be spoken to about delaying their payments if there is not enough cash in the bank, sales may need to be improved, inventory levels reduced… decisions that can only be taken once a projected cash flow statement is to hand.

Information is power. Projected cash flow statements provide information on which to act; ensuring the business entrepreneur has their ‘finger on the pulse’ of their business. Cash is the lifeblood of business and must be carefully monitored at all times to ensure small business success.

Other articles on Small Business Cash Flow:

Small Business Cash Flow – The Ultimate Guide
Cash Flow Problems in YOUR Small Business
Small Business Problems – Why are YOU in Business?
Small Business Cash Flow Problems
Cash Flow in Business
Cash Flow Projections – Important in Business?
How to Solve Cash Flow Problems: Inventory Turn

Cash Flow in Business

What is cash flow in business? Cash flow is the sum of all the cash received into your business, less all the cash payments being made from your business. Positive cash flow is when there is more cash coming into the business than is being paid out of it. Negative cash flow is when there is more cash being paid out of the business than is being received by the business.

Cash flow business issues arise in a small business for two major reasons:

The small business doesn’t have enough revenue (gross income) coming into the business compared to its expenses, and/or
The small business doesn’t have good internal financial management and administration procedures in place to support the business. This could mean the business has difficulty collecting its accounts receivables; it has too much cash tied up in stock; and/or it is spending too much money on business overheads/expenses/assets.

Many small businesses mostly focus on gross income and profit – before or after tax. While both are important in business, cash flow is the life blood of all businesses, and without it they eventually die.

Think about blood in relation to your body. If you lose all your blood, you will die. It is the same in business: have no cash and the business will eventually fail. While a business can sustain negative cash flow for a while if it has ample cash reserves, most small businesses do not, so consistent negative cash flow will wipe out a business.

Yet, very few small business entrepreneurs spend much time thinking about cash flow or understand how critical a business driver it is. The key transactions in business that affect cash flow are:

Sales (cash and credit).
Purchases (inventory and business expenses).
Business loans (new and repayments).
Business assets (buying and selling them).
Investments (new and repayments).

The key principles of good cash flow management are simple. Firstly, the small business needs to ensure it has more income coming into the business than expenses; and the business needs to have its accounts receivable paid on time so it can pay its own creditors.

I have developed the SPEARHead System™ – 50 Strategies For Supercharged Small Business Cash Flow to support small business entrepreneurs around the world get to grips with cash flow in business issues, so that it is a thing of the past. Why the SPEARHead? Well, the system addresses all the cash flow issues in small business as follows:

S – Sales Receivables

P – Purchases and Payables

E – Expense Management

A – Asset Acquisition

R – Residual Cash

Head – How does your business ‘head –off’ or ‘SPEARHead’ its competitors in the market?

It is critical that each of these factors is actively managed to improve the cash flow in business. Equally, cash and financial management is not necessarily the primary skill set of a small business owner, so it is important that they get help. An accountant or business manager can offer invaluable assistance, as can a book keeper or personal assistant, as they can collect accounts receivables outstanding; they can help with expense management; they can look for and perhaps negotiate for c cheaper input costs for the business. If the small business owner asks others to help them in managing their business, they can work on the parts of the business they are good at, which is very often the sales or business development side of the business.

All parties working together will see the cash flow business issues reduce or hopefully be a thing of the past. Doesn’t that sound attractive? I think so.

If you would like to know more about the SPEARHead System ™ and how it might help minimise the cash flow business problems in your business, please go to www.adelemclay.com/free-resources to download my SPEARHead System™ for free.

Other articles on Small Business Cash Flow:

Small Business Cash Flow – The Ultimate Guide
Cash Flow Problems in YOUR Small Business
Small Business Problems – Why are YOU in Business?
Small Business Cash Flow Problems
Cash Flow Projections – Important in Business?
Projected Cash Flow – Relevant in Business?
How to Solve Cash Flow Problems: Inventory Turn

Small Business Cash Flow Problems

Small business cash flow problems are an issue that afflicts many small business entrepreneurs across the world. Here are my top tips for getting through crisis situations in relation to small business cash flow problems.

Reduce the cash tied up in the business’s operating cycle

Accounts receivable and inventory holding can be major drains on cash flow. In a crisis situation, it is key that the business owner reduces the money held in accounts receivable by assertively collecting outstanding customer payments. At the same time, the business owner must increase the inventory turn so that there is less cash tied up in inventory in the business.

Review and increase the business’s gross profit margins

Essentially, this means either increasing the sales price of the products and services sold or reducing the cost of producing the goods (cost of goods sold).

Reduce the operating expenses within the business

A business often incurs too many expenses for its size. With serious attention a business owner can heavily reduce expenditure and therefore improve cash flow.

Reduce sales volumes

By reducing the sales volumes, by default sales and the cost of goods sold will decline. As a result, inventory holding will decline as will the money tied up in accounts receivable. This method of cash flow control is difficult for small businesses to implement and, if undertaken for a considerable period, will require the business owner to substantially reduce operating expenses. This should be considered as an emergency response only.

Ask suppliers for extended payment terms

Delaying the payment needs to be a short-term solution for managing a negative cash flow as it can affect a business’s credit rating with its suppliers. Holding back on the payment of inventory and other operating expenses will have a positive impact on cash flow. The practise of delaying payment of invoices is illegal in some countries, so a better option is to proactively ask your supplier for extended credit terms to help your business through the cash flow crisis.

Borrow money

Borrowing money from banks, family or friends can help a business through short or long-term cash flow crises.

Find equity capital

If the cash crisis is ongoing, another option for a business is to find an equity partner that will contribute cash in exchange for a percentage of the business. This is fraught with danger if the wrong equity partner is found, as things can go very wrong in the business. Equally, it can be a real opportunity if the equity partner is genuinely interested in helping the business grow and become more profitable and successful. When considering this option, make sure your business gets the correct business advisory support to ensure the deal is not too one-sided in favour of the new equity partner.

Hold cash reserves

This is the pie-in-the-sky option for businesses existing hand to mouth each month and unable to amass cash reserves at the bank. Regardless, the only way in which a business will be less impacted by negative cash flows is to have a cash reserve. The best way to have a reserve is to put a bit of money aside for a rainy day during good times. I can promise you that after your business experiences a few nightmarish cash flow crises, you will never want it to happen again, so finding money to put aside for the future is the best way to protect the business for the future.

Perhaps it is comforting to know that most entrepreneurs experience small business cash flow problems. If you know Sir Richard Branson’s entrepreneurial story, you will know that on many an occasion his businesses had no cash, and the banks were close to closing him down.

The key is NOT to put your head in the sand and hope it goes away. Small business cash flow problems come with the territory of being in business. Be front footed in addressing the issues. Talk to people who may be able to assist – your customers (to get paid quickly); your suppliers (to get extra credit); your accountant (to assist in trimming costs from the business and other business consulting support); your bank (to get extended credit if possible); potential equity parties (if your business can sustain this option).

Other articles on Small Business Cash Flow:

Small Business Cash Flow – The Ultimate Guide
Cash Flow Problems in YOUR Small Business
Small Business Problems – Why are YOU in Business?
Cash Flow in Business
Cash Flow Projections – Important in Business?
Projected Cash Flow – Relevant to Business?
How to Solve Cash Flow Problems: Inventory Turn

Cash Flow Problems in YOUR Small Business?

Cash flow is king (or queen) in a business. As any small business knows, having positive cash flow running through your small business is the key to success. If you don’t have that, you have a major cash flow problem.

We cannot pay our staff, ourselves and our monthly bills on profit. Our bills are paid from positive cash flow. How stressful is it not having enough money in the bank at month end when staff wages and salaries are due and there is not enough money in the bank? It can be a nightmare for a small business owner!! I know from personal experience when I was a young entrepreneur. We had great customers, but at times, due to their internal systems it took a long time to get paid. At times, cash flow problems were constant.

In accounting terms there is a little formula that can tell a small business owner how successful they are at collecting money from their customers. It’s called the ‘Accounts Receivable Ratio’ and is calculated as follows:

Accounts Receivable Ratio = Total Sales for the Year / Total Accounts Receivable Outstanding

So, if your total sales for the year were $500,000 and you currently have $100,000 outstanding in Accounts Receivable, then your Accounts Receivable Ratio would be $500,000/$100,000 = 5.

We then take the 5 and divide it by 365 days per year, so 365/5 = 73.

What does 73 mean? It means that on average your customers are taking 73 days to pay their accounts. That is scary, as that statistic will seriously affect your small business cash flow.

You see, if your terms of business with your customers are for your accounts to be paid at 7, 14 or 30 days, then by your customers taking on average 73 days to pay you, that is much longer than your terms of business with them, and therefore is detrimental to the success of your small business. Therefore your, will have a cash flow problem. I promise, you will run out of cash flow if that payment history continues.

That type of Accounts Receivable Ratio could also indicate that your customers do not have a healthy regard for your small business and its success. It could also mean that your customers are not good quality and they may also have their own business issues such that you may not collect the payment at all. How much of your Accounts Receivables are you writing off as bad debts each year? Perhaps it is time to find better quality customers that have more respect for you and your business. Writing off bad debts creates an even bigger cash flow problem, as you are receiving less cash into the business than you would originally forecast.

What should you do if your Accounts Receivable Ratio is poor? The first thing is to establish a plan and internal systems and process within your small business to ensure you or someone on your team is politely following up with your customers soon after the accounts are sent to ensure they have received it, and have arranged payment. There is nothing wrong with asking your customers the question: ‘When can we expect to receive payment?’

If you do not follow up with your customers, there will often be no urgency on their part to make payment to you, regardless of your terms of business with them. Remember, it is the squeaky wheel that gets the oil, so don’t be afraid to continue contacting your customer in order that you get paid.

Take control of your business and create systems and processes to enable your customers are followed up with to ensure your accounts are paid on time, or at least close to the due date. In doing that, you will eliminate one area of business challenge that could be exacerbating your small business cash flow problem.

Other articles on Small Business Cash Flow:

Small Business Cash Flow – The Ultimate Guide
Small Business Problems – Why are YOU in Business
Small Business Cash Flow Problems
Cash Flow in Business
Cash Flow Projections – Important in Business?
Projected Cash Flow – Relevant in Business?
How to Solve Cash Flow Problems: Inventory Turn

Small Business Cash Flow Problems

Positive cash flow is the life blood of all businesses. Without it they die – eventually!! Overstating the issue of business cash flow problems, you say? I think not! Without positive cash flow, a small business has big cash flow problems; lack of solvency being the likely key business issue.

Let’s be clear what I mean for a moment. Positive cash flow is where cash received into the business exceeds cash paid out, and negative cash flow is the opposite. It is where cash paid out by the business exceeds cash received by the business. Cash flow problems arise when a business has negative cash flow – more money going out of the business than is coming in.

Consider the ‘life blood’ analogy further. We all have blood moving around our bodies. If we lose most or all of our blood, we die!! It is the same in business. If a business has no cash within it, it will eventually die! I learnt from my own experience in business as a young entrepreneur, that one cannot pay bills, staff salaries and oneself on profit alone!

Profit is exceptionally important to business, and positive cash flow is too. They are two of the most critical drivers of a business. My favourite phrase in business is:

Turnover = Vanity; Profit = Sanity; Cash flow = Reality!!

The key transactions that impact cash flow are:

Sales (cash and credit sales)
Purchases (stock and business expenses)
Business loans (new loans and repayments)
Business assets (buying and selling assets)
Investments (repayments and new investment)

In simple terms, to be financially successful, a business needs to be cash flow positive. That means more cash needs to be coming into the business than is being paid out. Look at this simple example of a profitable business.

Let’s assume Smith’s Limited has just established taking a new product to market where sales will be $1,000 in month one, and then will double each month thereafter. Customers are given the fairly standard 30 day payment terms. However, Smith’s Limited has to buy its stock for cash, as it is a new company with no credit history with the supplier. The stock will cost 60 percent of retail price. General business expenses will be 20 percent of gross income each month, and are paid by month end, at the latest. Look at the profitability and cash flow effects of this opportunity after six months in business as shown in Tables 1 and 2.

	Month 1	Month 2	Month 3	Month 4	Month 5	Month 6	Total
	$	$	$	$	$	$	$
Gross Income	1,000	2,000	4,000	8,000	16,000	32,000	63,000
Less COGS	(600)	(1,200)	(2,400)	(4,800)	(9,600)	(19,200)	(37,800)
Gross Profit	400	800	1,600	3,200	6,400	12,800	25,200
Less Expenses	(200)	(400)	(800)	(1,600)	(3,200)	(6,400)	(12,600)
Net Profit	200	400	800	1,600	3,200	6,400	12,600

Table 1 – Smith’s Limited – Profit and Loss Statement for Six Months

	Month 1	Month 2	Month 3	Month 4	Month 5	Month 6	Total
	$	$	$	$	$	$	$
Cash In	0	1,000	2,000	4,000	8,000	16,000	31,000
Cash Out	(800)	(1,600)	(3,200)	(6,400)	(12,800)	(25,600)	(50,400)
Cash flow	(800)	(600)	(1,200)	(2400)	(4,800)	(9,600)	(19,400)

Table 2 – Smith’s Limited – Cash flow Statement for Six Months

What do you notice? The profitability of Smith’s Limited is $12,600 profit for six months. However in the same period, it also has a negative cash flow of $19,400, which means more cash is going out of the business than is coming in. If this was a real life situation, Smith’s Limited would have a major cash flow problem, especially if it had limited cash flow reserves in the bank. If the company is relying on a bank overdraft to fund the negative cash position, it could be scary for the company, as negative cash flow is the same as bank overdraft, and it is continuing to get bigger each month.

In this situation the accountant will say, ‘Well done for a start up business’, but the bank manager may well be saying, ‘No, we won’t extend your overdraft further’ or worse, ‘We are cancelling your overdraft’.

While this is an imaginary example, it is designed to demonstrate the point that if cash is not managed carefully, a successful business can be crippled and die!!

Reading is one thing, but implementation is another. Please look at your own business’ cash flow, and ask yourself, ‘Do I have cash flow problems in my small business?’. Be honest as your business relies on you to be so!

Ensuring your business is consistently cash flow positive will help you to create a financially strong and viable business, and it will help you sleep at night, not having to worry about where the cash is coming from to pay yourself, your staff and business expenses. Now, that sounds good to me!

Other articles on Small Business Cash Flow:

Small Business Cash Flow – The Ultimate Guide
Cash Flow Problems in YOUR Small Business
Cash Flow in Business
Cash Flow Projections – Important in Business?
Projected Cash Flow – Relevant in Business?
How to Solve Cash Flow Problems: Inventory Turn
Small Business Problems: Why are YOU in Business?

Rocky Road Cookies for Summertime Fun

I am a lover of baking… I prefer to bake it than eat it, which is a good thing. However, as our daughter gets older, I am attempting to pass on to her a love of baking. Mostly she declines to bake, saying: “You can do it, Mummy”. Grrr…. but she has loved making this Rocky Road Cookies recipe over and over again for her friends to enjoy.

This recipe takes not baking at all. It will take about 20 mins to make, then about 2 hours for the mixture to cool down and set before it is ready to be demolished by hungry children ─ big and small.

What you need:

300g good quality chocolate
125g butter
3 tablespoons golden syrup
200g digestive biscuits (partly crushed – not so they look like breadcrumbs… they need to be chunky to make the ‘rocky’ part of Rocky Road
500g of any of the following in whatever quantities you like: chopped dried apricots, raisins, sultanas, chopped marsh mellows, chopped dates (optional), chopped figs (optional), nuts (optional).

Line a 23cm square baking tin with sandwich paper so that the paper goes up both sides of the tin.

Heat a pot of water on the hob and place a heatproof bowl on top. Add chocolate, butter and golden syrup. Gently melt the ingredients, and then turn off the element.

Meanwhile in a second and larger bowl, add the crushed digestive biscuits, chopped dried fruit, nuts, and chopped marsh mellows. Mix together.

When melted, add the chocolate mixture to the second bowl and stir until thoroughly mixed. Pour into the baking tin and even out the edges until the mixture is fully spread across the tin. Refrigerate until set. Remove from tin and serve.

I find the Rocky Road is most tasty when served at room temperature, so take it out of the refrigerator about half an hour before you want to serve it to let the chocolate warm up a little. Yum, yum, super yum! Enjoy!!

Other Delicious Delights

Death by Chocolate Cake
Bonanza Banana Cake
Classic Carrot Cake
Pavlova Perfection