Whatever your business does, the purpose of it is simple: to do it at a profit.
That’s the whole point of business. Even if you run a not-for-profit organisation, you still need to make a profit to reinvest (or at the very least break even).
So how do you make a profit from your business? (more…)
If a stranger walked up to you and asked to borrow £100 on the spot with a promise that you would be paid back in 30 days, would you oblige? Thought not!
What about repayment and the implications if it failed to materialise? Despite these obvious risks, many firms are expected to do business this way.
With the UK in a period of prolonged recession or very low growth, and with the credit crunch affecting the economy, conditions are very difficult for a large number of small businesses.
The realities of a recession means that consumer spending is weaker and therefore any service provider, retail outlet or manufacturer that is reliant on this ‘consumer spend’ will find it hard going.
Sadly, there is a real culture of late payments in the UK. For business to business transactions, most firms automatically expect 30 days credit. In fact, if you don’t agree different terms, the law says businesses can take 30 days to pay by default.
If you find yourself lucky enough to be supplying very big companies, you will sometimes find they demand 60 or 90 days to pay, or maybe even longer.
Unless you’ve got mortgage-free commercial premises or machinery, the biggest asset in your business is probably its sales ledger.
Its value shouldn’t be under-estimated. The money your business will bring in each month is a valuable tool that can be used to make business life easier.