- Keep track of who owes you money
- See how much you are spending on materials and services
- See the money coming in and going out
- Make sure you don't spend more than you earn
Invoices & Statements
- You need these in order to get paid
- An invoice is a bill which outlines the products/services
- A statement is a reminder of this payment/bill
The date is essential
An invoice usually provides a date on when the payment needs to be received
Essentials of an invoice
- Your business address
- Your customer's address
- The date of the invoice
- Item by item details of the service or product provided
- Total amount due
Essentials of a statement
How much they owe you
How much they have been owing you money for
Details in which they need to pay
- Your business address
- Your customer's address
- A list of recent invoices you have sent out
- Details of invoices paid and unpaid
- Total amount outstanding
Terms and conditions
- Designed to protect your rights and interests
- Costs
- Delivery arrangements
- Payment terms
- Credit limits
- Your right to charge interest on overdue amounts...
- ...and claim compensation for recovery costs
- A commitment to quality
- Data protection (assuring the customer - respect for privacy)
Responsibilities you and the client undertake
Clear and concise - in context
All conditions clearly set out
Shorthand used in correspondence (explanation of terminology)
Discounts / instalments
The statement
- Send out on or day before the due date
- Send out every month thereafter
- How much is owed
- How long it has been outstanding
- A call to action
- The less time you tolerate, the easier it will be in the long run
Accounting software
£75 - Quick Books (industry standard)
£19 / month - Online Quick Books essentials
£26 - Bank Tree (basic - for low key/small businesses)
£240 - Sage (worldwide, industry standard
- Produce reports based on your income
- Know who are your best customers
- Offer incentives? Generates more business
- Patterns of purchasing behaviour
- Profit / loss / where your money is going
Accountant
Chartered or certified
Ask for a quote before choosing an accountant
What businesses spend money on
Start up costs
Overheads
Direct costs
Start up costs (one-off)
- Spend cash on new equipment
- Design web site
- Register company name
- Design logo - make signs
- Decorate premises
- Launch party
- Promote & raise awareness
- Networking
Many companies get a loan to cover these initial expenses
Pay back each month over 2-3 years
Tends to be more short term loans
Where does the money come from?
- Banks - Barclays, Natwest, HSBC, Lloyds (hardly lending money)
- Crowd funding - Find them online (No expected return)
- Funding organisations and investors - The Arts Council, venture capitalists, shareholders etc
- Prizes and awards - D&AD, Make Your Mark and so on (Cash prizes, CV)
What do investors want to know?
- Marketing plan
- How much money do you need?
- How much money have you got?
- How will you spend the money?
- How will you pay the money back?
- How much you intend to earn and when.
Indirect costs (overheads / fixed costs)
- Utilities
- Office supplies
- Equipment leases
- Part time help
- Insurance
- Rent
- Telephone
- Postage
- Marketing
Direct costs
- A cost directly attributable to the manufacturing of a product
- Or, what the customers takes away with them (tangible)
- e.g. Shirt - Total manufacture, packaging and delivery
Bottle of water
Water, bottle with cap, label, tray and cling wrap = <1p
All other costs = Overheads, delivery and so on...
Tangible Assets
Assets having a physical existence and that maintain a substantial value even though depreciating at a calculable rate (anything you can physically touch).
Intangible assets
Brand
Trade secrets
Copyrights
Trademarks
Goodwill
Competitive advantage
Cost = What you spend
Price = What you charge
Capital
The money, property and other valuable which collectively represent the wealth of an individual or business (capital assets) Intangible and tangible assets.
- Receipts - Money coming into the business (from sales - opposite of a standard receipt)
- Payments - Money going out of the business (for rent, materials etc)
- Cash flow / net cash flow- Cash receipts minus cash payments
If the receipts are less than the payments, you will have a negative cash flow
- Balance - The amount of money in an account at any given moment
- Profit - The positive gain from an investment or from a business operation after subtracting expenses
- Loss - A position in which a company's expenses have exceeded its receipts. A reduction in the value of an investment.
What to do if you intend to make money
- Open a separate bank account for your business
- Find a CERTIFIED, inexpensive accountant
- Find a local solicitor (before dealing with clients)
- Register your business with the Inland Revenue
Sources of information
- Business Link - Designed for small businesses
- Startups - General info
- HM Revenue & Customs - Complex
- T-Shirts and Suits: A Guide to the Business of Creativity - Free eBook
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