AGS Business Challenge FAQs

This is the term used to describe the money that comes into and out of a business, typically over a given period, such as a month. This includes cash coming in from customers and money spent on expenses.

Cash flow is not only an indicator of financial performance but is also widely seen as the key indicator of a company’s broader financial health. If cash were to run out then a business cannot operate.

In fact, negative cash flow is one of the most common reasons for insolvency and business failure.

Conversely, businesses with a cash surplus can use those funds to finance innovation, new products or services or other investments that may help a business to grow.

To monitor the cash that is flowing through a business you need to conduct regular cash flow forecasts. It is recommended, that as a minimum, businesses should have forecasts covering the next 30, 60 and 90 day periods. This can help businesses spot potential cash flow issues.

To produce a cash flow forecast, a business should list the amount of cash coming into the businesses in income. Usually, most businesses start with a sales forecast for the period and then add additional income from other sources.

Businesses then need to figure out the cash leaving the business (outgoings), which includes expenses and all other costs incurred during trading, such as salaries and any outstanding finance.

Once you have these figures you simply take away your net outgoings from your net income. That will give you either a positive cash flow figure or a negative cash flow figure.

Where a customer doesn’t pay at the point of purchase, this cash flow will need to come in through the collection of accounts receivable.

Many of the modern online accounting systems can quickly and easily – with the assistance of a trained professional – produce accurate cash flow forecasts, as well as more detailed management reports. Connected via the cloud to sales records and other financial documents, this software can do much of the work for you.

There are three key elements involved in managing healthy cash flow:

  • Control stock – If you are holding on to too many goods then you may be tying up cash for investment. By estimating your needs better, you can reduce overspend and tied up assets.
  • Reduce costs – Cost management strategies can help to reduce outgoings and could include managing energy costs, re-evaluating and negotiating rents or reducing the amount spent on salaries and other benefits.
  • Collect late payments – Late payments are a blight for many businesses, which is why businesses must have effective credit control processes and collection schedules in place.

Other elements, such as improving sales, cannot always be controlled, so businesses struggling with cash flow should address these issues first.

Credit control ensures all receivables are paid on time. If you do not get paid on time then you may not be able to cover the costs of your own business.

It can be challenging to chase clients and customers for payment, but it is essential. There are a growing number of software packages available to assist businesses with this, which can produce automated reminders and message for late payers.

In extreme cases, it may be worth ending unprofitable relationships so cash flow isn’t affected over the long term.

There are various types of creditor finance that businesses can use, such as invoice financing, which provide temporary lending to businesses struggling with cash flow. These can be useful, but like with any lending, caution must be taken to not become heavily indebted.

To accurately price a product or service, businesses should:

  • Evaluate the costs of supplying the goods or service
  • Research the market for similar products offered by competitors
  • Choose a pricing technique that suits the good or service
  • Consider the current availability of the product being offered.

These are the basic methods of pricing, but there are many other factors to consider, which is why professional advice should always be sought.

Psychological pricing relies on prices being set lower than a whole number, so instead of charging £1 a business would charge 99p.

The theory behind psychological pricing is that customers will see the lowered price and treat it lower than the price is.

Various studies show that this approach remains effective, despite it being widely employed by many businesses.

Many modern sales platforms, such as Amazon, provide solutions that help businesses set an accurate price for their goods.

There are also other applications and software available that can help businesses to review their pricing strategy to find the best cost to the consumer and the business.

By discounting goods or providing offers, a business may be able to outprice their competitor and attract new clients or customers.

Businesses should take care, however, not to undermine the profitability of the good or service being offered or lower the reputation of a business or brand.

AGS Business Challenge FAQs – Business Finance

This is the amount of money needed to cover the difference between the value of stock and debtors in your business and the number of creditors you have. If businesses struggle with working capital there are various finance options available to them.

There are several finance solutions to help with working capital funding, including credit cards, overdrafts, debtor financing and stock finance.

Growing your business will often involve buying new assets, such as equipment, vehicles, machinery or premises, but this can be costly.

Finance is often the only viable way to fund such plans. In the case of long-term investments, businesses may want to consider commercial mortgages, traditional term loans, hire purchase and leasing.

Money is often the greatest hurdle for people wanting to start a new business, but there are various options available to people who are unable to fund a new venture including business loans, family loans and investments, outside investment, soft loans and grants and business angels.

Many traditional finance options may not suit some businesses. However, in response to this many alternative forms of finance are now available, including peer to peer finance and crowdfunding. These methods tend to rely on lots of investors, rather than a single lender or organisation to supply funding.

Office vs home working – Managing staff remotely

If members of your team are working remotely from home, then you should implement a home working policy or agreement.

This will typically include guidance and rules on what employees can and cannot do while working from home, but it may also reinforce data policy arrangements and IT and security policies.

Failing to put a policy in place may limit an employer’s recourse if an employee behaves inappropriately.

Employers have the same health and safety responsibilities for home workers as for any other workers, which includes looking after a worker's physical and mental health.

All elements of employment law also remain the same, including key concepts such as mutual trust, which is implied in most employment contracts.

Employers should support staff working from home, ensuring they have the right equipment and access to systems and tools necessary to do their job.

Employers should also take care if they decide to monitor staff working from home, as they could unwittingly discriminate, breach data protection laws or even find themselves in conflict with human rights legislation.

Employers can provide expenses and equipment to staff working from home, but they are not legally required to do so.

Where an employer does not provide expenses then an employee can seek tax relief via the working from home allowance, which could offer up to £6 per week (depending on their tax band) to cover home working related costs.

Where an employer does not provide expenses then an employee can seek tax relief via the working from home allowance, which could offer up to £6 per week (depending on their tax band) to cover home working related costs.

Remote recruiting and training

Some of the key issues with remote working are:

  • Social isolation
  • Lack of face-to-face interactions
  • Inability to access information.

These same challenges affect staff development. Whilst employees may be able to continue their formal studies, they may miss out on the mentorship and interactions, which are also important elements of staff training.

Employers should take time to communicate with trainees and other staff members taking the next steps in their career to make sure they have the technical and pastoral tools needed to progress.

Make sure to set aside time to speak with and review progress with each member of your team, whether by phone, email or a video call.

Many of the existing methods of advertising a job remains true, but difficulties often arise during the selection and interview process.

When hiring remote candidates, phone and video interviews will be your primary communication channels, although emails and forms may also play a role.

You could also use assessment tools to evaluate candidates’ skills and make objective hiring decisions, where you don’t meet the candidate in person.

Given the inability to meet with candidates, references will also play a key role in selecting someone suited to your business. Take the time to speak with referees and compare notes.

When onboarding a new remote worker, it is important that they are properly set up and settled in. This is a little more difficult than meeting in person, but employees should:

  • Ensure they have the tools and technology to do the job effectively
  • Create clear lines of communication
  • Conduct regular check-in to make sure the employee is supported
  • Provide helpful feedback on progression and performance.
 

Vaccination policy

As yet, no law says people must have the vaccine, even if an employer would prefer someone to be vaccinated.

There may also be some people who are advised not to have the vaccine, for example for health reasons or a disability.

Requiring that these individuals get vaccinated to work could be considered discriminatory behaviour.

Employers should agree arrangements with employees and any decision after that discussion should be put in writing, for example in a workplace policy, which must also be in line with the organisation's existing disciplinary and grievance policy.

Under the Data Protection Act, an employee does not need to inform an employer whether they have been vaccinated and neither should employers request this information, as it is considered personal sensitive data.

However, in certain circumstances an employer can ask for a staff member to be vaccinated if it is relevant to their roles, such as they care for others or the employer has a specific vaccination policy in place, which the employee has agreed to.

It's best to support staff to get the vaccine without forcing them to do so. Take time to speak with them and find out their reasons for not getting vaccinated.

Employers should be sensitive towards personal situations and must keep any concerns confidential. They must also be careful to avoid discriminatory behaviour.

Where an existing vaccination policy is in place, an employer may be able to take action appropriate to the situation. However, they should still seek legal advice before doing so.

Subscribe
Sign-up to receive our news and updates by email

    I am happy to receive newsletters and promotional information from AGS Accountants.

    If you would like to see full details of our data practices please visit our Privacy Policy.