Investment growth for charities – but potential for higher earnings from cash deposits!

Charity Financials recently published Charity Income Spotlight report makes for interesting and positive reading, highlighting the significant growth in investment income that charities are enjoying. It states that income from investments among the top 5,000 charities increased 6% year on year, with total investments among this group now worth £3.29bn, £600m more than in 2008.

Making money working harder in this way creates a very valuable income stream for charities, generating valuable unrestricted funds to further an organisation’s mission.

But our insight is that charities can do even more.

Judging by the charities we have spoken with over the past months, investment money is one part of the portfolio and cash deposits are a separate, and mostly neglected, part. Charities need to keep cash in the bank – as reserves, committed project funding, for operating expenditure – and this is where greater income can be generated.

Our insight suggests that charities could raise at least 10x more from cash deposits in banks – based on a split portfolio that includes instant access accounts. This equates to in the region of £60,000/yr on a £5m cash deposit – it would take 1,000 supporters giving £5/month for a year to raise that!

But how?

With Akoni’s digital cash management platform you can find the best rates (suited to your term and risk requirements), open accounts and manage your cash across multiple accounts in a couple of clicks without the paperwork.

Akoni helps businesses make the most of their cash. Register free at panel.akonihub.com and follow us on Twitter

Akoni’s Dynamic Cash Forecasting

Acquiring banking products is a lengthy process of paperwork, taking 30-100 days to process. Businesses shy away from even finding out what opportunities they might be missing , for the simple reason that they don’t have the time to deal with it. With Akoni’s tools, particularly its ability to use powerful innovation on data from multiple sources, the process can be cut down to 1-3 days, or even be dealt with in real time in some cases.

This was exhibited recently at Finovate Europe, 6-9 March London, when Tesobe and the Open Banking Project, chose to include Akoni’s Dynamic Cash Forecasting as part of its demonstration.

This dynamic cash forecast uses data from public and private sources to analyse a company’s cash flow needs on a monthly basis, and produce a forecast for their cash balance needs throughout the year. In reporting the monthly cash requirements of the company, the platform will also highlight any expected cash surplus for a given month.

What do companies do with this surplus cash? Typically, nothing.

It will continue to exist as an unused asset delivering next to nothing in terms of revenue, and given the current inflation rates, it will often depreciate. However, Akoni not only maps out the cash surplus each month but can instantly produce a cash management planner that shows how the spare funds could be allocated to bank accounts that will achieve a real return on the cash. This is all done within the company’s stated governance and compliance requirements.

However, most SMEs and small corporates don’t have the resource or the time to deal with opening multiple new bank accounts and instructing and withdrawing deposits on a regular basis; so how does this help?

The great thing about Akoni’s offering is that it allows the user to open the multiple recommended bank accounts, make deposits and withdrawals, and generally manage their cash without the hassle or paperwork typically required. The cash plan can be put into action with no more paperwork than the single onboarding form that is required at the outset. In terms of the user’s effort, bank accounts and deposits can then be made live with nothing more than a few clicks. The simplicity of the cash management is perfectly illustrated in our short video.

As more and more SMEs continue to onboard with Akoni, we hope to further cut away at the staggering amount of unworked cash that is sitting under their control. With sign-up being for free, and Akoni offering a genuinely hassle free solution, there’s no excuse for delaying another day. Get started now!

Akoni helps businesses make the most of their cash. Register free at panel.akonihub.com and follow us on Twitter

Turning inventory into cash: Tips for SMEs struggling with late payments

Small businesses are the foundations for every economy – but they are also the most precarious of enterprises.  And it all boils down to money.

A great service, an iron will, and great customer loyalty are not enough to keep things moving if there’s a cash flow problem. This major issue is what determines whether an SME is on the brink of success, ready to scale or nearly bust.

Getting cash flow positive doesn’t happen overnight. Any investment made in products or workers takes time to transform into liquidity. Unfortunately – that’s one thing most SMEs simply don’t have – time to wait for payment.

Add to the mix the need to also pay for employee wages and other overhead costs and suddenly an SME without a decent cash flow runway is borrowing money to cover costs at high interest rates, which hinders the ultimate goal for any business – maximum profitability.

On average, SMEs have a 30-day cash reserve to cover cash flow problems. If payment takes 60 days or more, businesses can start to falter because they need twice the amount of reserves to cover costs and the next round of inventory – whether it’s physical or professional services. The slower the cash-to-cash cycle the more expensive it gets to run a business.

The culture of late payment is getting worse for SMEs and undermining the stability of economies. According to research conducted by MarketInvoice, over 60% of invoices issued by UK SMEs in 2017 – worth over 21 billion- were paid late – up 62% from the previous year.

An economy can’t thrive if SMEs cannot resolve this critical issue – they are worth too much to national growth and to the cohesiveness of communities. In the UK, SMEs account for 47% of all private sector turnover – a sum too big to ignore.

So, what are some of the ways to avoid such a scenario?

Do SMEs have any power over the speed in which they manage cash flow? Or is the act of chasing invoices part and parcel of what it means to run a small business?

While there’s no panacea to cure the late payment scourge, there are several ways to help minimize the cash-to-cash cycle without having to borrow finance or call in the lawyers.

  1. Don’t tolerate late payments

Extending terms to your customers to delay payment will give them permission to make late payments – a something you need to avoid from the very start of a client relationship. Offering discounts for early payments can also work well, and incorporating a late payment policy can dissuade payment delays.

2. Itemise and split invoice fees to encourage faster payment

Billing for fees or expenses can bloat a final invoice – so why wait until the very end to settle the total if the service has already been delivered? Itemise and bill separately for spending you’ve made for your client to complete the job the moment it’s done. This gives the client enough time to review and go through the charges- and enough time for you to resolve any disputes that can delay reimbursement.

3. Optimise supply and demand performance

Keep track of the demand of your inventory – don’t order too much or too little – and work closely with marketing teams to know when promotions and new campaigns will launch and potentially spike interest in your goods or services. This can help you prepare for demand and get the right amount of stock in place ahead of time. Planning and forecasting schedules for sales and operation planning goes a long way to managing cash-flow cycles. You would also be wise to consider investment in customer relationship platforms that keep track of their spending habits and preferences – as well as the performance of your competitors.

4. Trim overheads

Lean companies have the agility to deliver goods quickly and to achieve faster turnaround for payment. Take control of your end-to-end processes, and fill any gaping holes that are making it more expensive to run your operations and partner with any suppliers to integrate process and enhance your performance. Running a tight ship is important – but keep an eye on stock calculations to guard against your customer service and company brand.

5. Optimise order-to-cash process

Examine every step of the invoice process, and eliminate anything that is slowing down the payment cycle. Investing in digital invoicing, financing and payment platforms are other good ways to reduce time in order-to-cash processes as well.

The persistent and growing trend in late payments remains a critical issue for most SMEs, so preparing for the likelihood of slow cash-to-cash cycles is important – not only for the small businesses but for the overall economy as well, which relies on the billions that small companies generate each year to fuel its growth and prosperity.

6. Manage cash effectively

When holding cash, ensure that it is always deposited in accounts that will create the optimal returns for your cash flow circumstances. Managed porting of your cash holdings will leave you with cash available when you need it, but also generate returns from an asset that otherwise wouldn’t be working for you. For more information on how to manage cash portability effectively, contact Akoni.

Akoni helps businesses make the most of their cash. Register free at panel.akonihub.com and follow us on Twitter

 

Can charities look at other areas of their organisation to generate more income?

I’ve spent the best part of the last twenty years working in charities. Most of this time, except for the last three years where I’ve been CEO of a charity (and still am part time), has been focused on fundraising – bringing in money so that each of the charities could further their mission.

I have first-hand experience of how difficult it is to generate income year after year. How challenging it is to think of the next fundraising idea… I still love this challenge. In the past month I’ve started a new job which has opened my eyes to new areas of potential income for charities.

I’ve just started to work at Akoni Hub – this blog post is on the Akoni Hub site so you might have guessed that. Akoni is a fintech business founded by one of the Trustees of the charity where I am also CEO. When I first heard about Akoni’s offering I immediately recognised the huge benefits it could have for the nonprofit sector.

Using Akoni’s innovative, digital cash management platform, charities, and in fact all businesses, can find the best interest rates for their risk and term requirements and spend the extra earnings on things that matter. All at the click of a button – without having to set up multiple bank accounts.

This video sums up the simplicity and the effectiveness of the platform.

So I guess this is fundraising. But it’s a different kind of fundraising – it’s hassle free. It can be planned to your requirements. It utilises resources (cash in bank) which are not bringing in income. It’s guaranteed. Making your cash (think of those reserves in the bank!) work harder for you could be the easiest fundraising in your portfolio.

I’ll be updating this blog regularly over the coming months with news, views and insights. Please feel free to get in touch with me at Stephen.harvey@akonihub.com if you’d like to find out how Akoni Hub can help your nonprofit to maximise your cash.

Akoni helps businesses make the most of their cash. Register free at AkoniHub.com and follow us on Twitter

 

Where’s the money? Some advice to improve your business’ Cash Flow

Cash flow is one of the issues SMEs struggle with the most. It is a topic much discussed and many owners of Small Businesses will confirm that it is a major concern of theirs.

In order to keep your business’ cash flowing you will have to make sure you are managing your cash properly. Careful cash management is generating revenues that bring in more cash than you are spending on your stock, your team and other business expenses and to manage this on an ongoing basis. It boils down to collecting data, reviewing and analysing it and then distributing cash where it is most needed. This may sound quite straight forward but most small and medium sized businesses fail to take the necessary steps in this regard.

1. Cash Forecasting

You should review your expenses such as rent, inventory, salaries and wages and taxes on a regular basis. It’s important to always know what costs you have and make a plan for the future as to what those costs will be and when they will hit your bank balance. Plan exactly when and how much you will be spending and always ask yourself why you are spending the money on each expense. This way you will be able to see what your necessary expenses are and which ones you could save on. There are various cash forecasting tools that can help you map out your spendings.

2. Monitor incoming payments

Check your accounts regularly for payments coming in. Late payments are a problem that many SMEs face and they can often be the reason for running low on cash. To avoid this make sure you invoice your customers promptly and to send invoices to the right person. Keep track of outstanding payments and take measures to chase late payments. There is nothing wrong with giving customers a nudge. A great, non-invasive, way of doing this is sending out reminder emails to encourage customers to pay outstanding bills. Visually appealing emails, with a simple call to action, such as “Pay Now”, linking to a payment site, will go a long way.

3. Dream big, stay humble

Having a grand vision of your business’ future is important and ambition is desired. However, it is important to stay realistic. The only certainty you have is that the future of any business is uncertain. Even if you can follow a particular patterns in earnings, it doesn’t mean that these will continue as such. You cannot predict the behaviour of potential customers and rates change all the time, in an unpredictable way. Therefore it is smart to expect the worst while working for the best, when managing your business’ cash.

4. Maximise the returns on your cash holdings

An aspect almost always neglected by SMEs is making sure that the business’ cash holdings are generating the maximum amount of returns, based on the best rates of the market. This is partially due to a lack of awareness of market activity, but mostly it is a lack of time and resources to scan the market for the best rates and then moving the business’ money around accordingly. Akoni stepped up and created a tool to automate this process. We provide a platform that scans the market for the best rates and cash can then be continuously allocated in a way that will maximise returns, in just a few clicks. In this way you can make extra money for your business while not adding another task to the to-do list.

If you follow these basic guidelines your business will be in a secure position to continue running and you can properly facilitate growth with healthy cash flow.

Akoni helps businesses make the most of their cash. Register free at AkoniHub.com and follow us on Twitter

 

 

Poor Financial Management: 5 Practical Tips To Save Your Small Business

The right amount of debt can propel the business into a high growth trajectory but too much debt can pull it down as quickly. The magnitude of the problem is revealed by a U.S. Small Business Administration (SBA) study that shows that half of small businesses tend to collapse within the first 5 years due to poor financial management, including excessive debt.

Akoni can help to increase returns on cash holdings, but we think you should have a look at these tips as well

Read more…

Akoni helps businesses make the most of their cash. Register for free at AkoniHub.com and follow us on Twitter

Small businesses working hard to meet living wage challenge

The article below outlines the struggles British Small Businesses face with being able to keep up with the National Living Wage for their employees. They do seem to manage to find the funds by adjusting their budget but we can’t help to think that Akoni can add value to this issue, by offering Small Businesses better returns for their existing cash. This of course means more money on their accounts for anything that is needed to keep the business going and perhaps even grow:

“British small businesses are managing to stretch their budgets to cover the national living wage for their employees.

New research from the Federation of Small Businesses (FSB) shows the majority (64 per cent) of small firms impacted by the National Living Wage (NLW) have stretched to meet the latest rise by taking lower profits.”

Read the full article here http://smallbusiness.co.uk/small-businesses-meet-living-wage-2540101/?platform=hootsuite

5 tips for effective SME cash flow management

Profitable businesses fail every year because they simply run out of cash. Stay in control, achieve healthy cash flow and grow your business with these tips.

Understanding cash flow is crucial if you want your business to survive.

Only by staying on top of the incomings and outgoings of your business can stay in control, make informed decisions and protect your business against unforeseen events, such as an unexpected tax bill from HMRC. Here are five steps to keeping your business in tip top condition by managing cash flow successfully.

Continue reading the article on http://www.smeweb.com/2017/07/03/effective-sme-cash-flow-management/

Are you making these cashflow mistakes?

Banana skin

According to a recent study by a global Bank, 82% of small businesses fail because of poor cash management skills or poor understanding of cashflow. Don’t let yours be one of them!

Here are four common – and costly – cashflow mistakes. Are you making any of these?

1. Omitting to analyse your expenditure

You should review your expenses regularly, including rent, inventory, salaries and wages, taxes and debt payment. What’s right for your business will depend on what you do. For example, a local B2C business might choose to pay high rent for a prime location with high footfall, while a B2B wholesaler can save on rental costs by choosing a cheaper out-of-town location.

Benchmark your spending against competitors and other companies of a similar size and life cycle. Consider the potential return on every penny you spend, and trim any unnecessary expenditure.

Create a strategic forecast to help guide your budget. Record the amount and date of all your upcoming cash outlays. Create a separate line item for every significant cost.

Cash forecasting should be a simple activity incorporated into the monthly activities of a business and there are various tools that can assist.

2. Forgetting to focus on the money flowing in

Money in accounts receivable can be a sign of payments to come, but the money still needs to be collected. You can’t spend accounts receivable yet, so don’t treat them as profit.

Create (and follow) a process to keep on top of incoming payments:

  • Issue invoices promptly
  • Implement credit checks on all new non-cash customers
  • Collect a deposit at the point of the initial order
  • Move to payment in advance, or even cash-on-delivery, if possible
  • Track slow-paying customers and don’t delay about contacting them

Monitor ‘Collection days’ (how long you wait to get paid); ‘Inventory turnover’ (how long inventory sits on your shelf); and ‘Payment days’ (how long you wait to pay your suppliers). Negotiate faster payment terms with your clients and slower terms with your suppliers.

Be proactive about collecting late payments. Ensure the contract you have with your clients makes clear what happens when payments are delayed, such as applying a late-payment penalty or stopping work.

Cashflow advice is one of the things you get in your AkoniHub personalised report.

3. Not being realistic

The only constant is change. So don’t assume that receivables will always continue to come in at the same rate. Also, interest rates fluctuate, and payables may not be extended as far as they have been in the past.

It’s impossible to predict the future, so the best thing to do is to prepare for the worst, while hoping and working for the best.

If you find yourself heading for a sticky cashflow situation:

  • Apply for working capital before you run out of money (banks are happier to offer a loan before you need it)
  • Ask your suppliers for extended payment terms (they have a vested interest in your success)

It’s easy to find the business bank accounts with the best interest rate when you join AkoniHub.

4. Growing too fast

Remember, turnover isn’t profit, and profit isn’t cash. Your company will only survive if you generate more cash than you spend. If your outgoing expenses exceed your incoming cash, you have a cashflow problem.

The answer isn’t just selling more stuff, more quickly – because the faster you grow, the more financing you need. You will always need cash to use as working capital.

Don’t take an increase in orders as a sign to increase spending. Don’t build up inventory that you hold in stock for ages. Continue to be ‘lean’ and operate on minimal expenditure as you grow.

Plan ahead and secure appropriate financing to ensure you have sufficient working capital for peak times.

Retailers have to do major purchasing in the run up to busy seasons such as Christmas, but not all patterns are so predictable. If you’re experiencing or facing a growth spurt, remember that production costs increase at the same rate as sales. To avoid increased returns or loss of loyal customers, ensure your customer service is scaleable to cope with increased demand.

In summary

Following these tips will keep investors happy, allow you to make strategic choices, and provide you with a financial cushion in case you need it.

Akoni helps businesses make the most of their cash. Register for free at AkoniHub.com

Cash management for construction firms

As with any business, ‘cashflow is king’ in the construction industry.

Even profitable construction companies can have cashflow problems, and there has been a high rate of insolvencies in the industry for years. Contractors go out of business not because they run out of work, but because of poor management and lack of financial control.

If you consistently make a loss, you’ll fail. If you run out of cash, you’ll fail.

Construction companies need special cashflow management strategies to help them fund expenses, mitigate any losses, and achieve profitability.

Here are some of the challenges that are unique to this sector:

Time-lag between income and expenses

Construction companies have to cover their expenses every week, even though the average number of days it takes to get paid is 60 – 90.

Change orders

Change orders are common, due to extreme weather causing delays, or a project requiring more time, money and/or resources than originally expected. Try to resolve change orders quickly so the project can be completed and the final bill issued.

Retention

Construction contracts often have a retention rate up to 10%, meaning that only 90% of completed work can be billed. Try to negotiate a reduction in the retention rate, perhaps dropping to 5% retention once 50% of the work is complete. If possible, withhold payment to your sub-contractors at the same rate (assuming that is permitted under local regulations).

Inventory

Don’t buy too many materials and store them for future use. If not used quickly, this inventory just ties up your cash. Don’t allow resources to build up beyond what you need in the short- to medium-term, and sell off any excess.

Equipment

Similarly, if you have invested in equipment that’s not in use, it’s losing money. Know how much each item costs to run, and monitor your equipment usage accurately. Limit downtime. If equipment is not generating money for the business, then rent it or sell it. Consider leasing fixed assets rather than purchasing them.

Cash management throughout the lifecycle of a construction project

Every project is different, and you need to know the net cash position for each unique project. Here are some tips that cover the five main stages of a construction contract:

  1. Pre-bidding and bidding
  • Review the credit status of your potential customer
  • Review the payment arrangements in the project contract
  • Cost the contract accurately
  • Understand what financial records need to be kept
  1. Contract awarded
  • Finalise the details of the project contract and negotiate favourable terms
    • When payments will be made
    • How payments will be made
    • What happens if payments are not made
    • What costs are allowed within the contract
    • What performance penalty is allowed, if any
    • What is the retention rate
    • When is the property owner’s monthly cut-off for invoices to be received
  1. Before construction
  • Hold a pre-construction meeting to agree the project overview and what reporting and documentation is required
  • Establish a performance and billing schedule, month by month
  1. During construction
  • Follow the performance and billing schedule
  • Follow the schedule of values
  • Negotiate with vendors and subcontractors to save money
  • Send invoices in line with the contract terms
  • Pay suppliers in line with the contract terms
  1. End of contract
  • To avoid delaying the final payment, ensure you complete the project to the customer’s satisfaction
  • Collect the final payment

If that’s what to focus on for each construction project, here is some general cashflow management advice:

At company level

  • Use cashflow management software to predict future income and expenses
  • Train your project managers so they understand how to manage cashflow
  • Develop a good relationship with your bank, so you can access credit if you need it to cover unexpected expenses

Dealing with suppliers

  • Let suppliers know you are shopping around – this incentivises them to offer you the best deal
  • Negotiate a discount on materials
  • Extend credit from 30 to 60 days
  • Use financing to spread the cost

Paying staff

  • Offer incentives based on cashflow performance
  • Consider outsourcing. Full-time construction employees are usually paid weekly or fortnightly, while sub-contractors are usually paid every month (this can benefit cashflow but potentially raises the risk of issues with security or quality)

Invoicing customers

  • Write clear payment terms
  • Check credit reports before you make any deals
  • Develop a front-loaded schedule of values. Bill in phases for items such as mobilisation, then site development, and finally walls, roof, landscaping and finish. Don’t put all the profit into the last tasks. Build profit into the front end to help mitigate the natural cash outflow when the job gets underway
  • Automate your invoices so they are issued on time – or even early
  • Offer payment incentives
  • Avoid over-billing and under-billing. Over-billing may increase cashflow in the short term, but too much overbilling may mean that you are borrowing from one job to pay for another. It’s best to invoice according to how much of the project is completed
  • Accept electronic payments; they are the quickest way to get paid
  • Do whatever you can to increase the speed of receivables, such as reducing your payment terms to 50 days or less
  • Chase late payers promptly, and restructure terms

Automation

There are various ways to make it easier to manage your construction company, such as job management software from Okappy, and cash management services from AkoniHub.

With money in the bank, you can pay bills promptly, which helps get competitive prices from suppliers and sub-contractors. With better cashflow, you have more capital to use for day-to-day operations, accounts payable and growth. With increased automation, you can stay on top of your cashflow and have more chance of building a successful construction business.

Akoni helps businesses make the most of their cash. Register for free at AkoniHub.com