CASH FLOW PROJECTIONS
Cash flow projections provide you the visibility you need to avoid
problems and create the financial success.
Cash Flow Projections Made Easy
Creating cash flow projections does not have to be a difficult
process. It is really a matter of using a few basic principles together
with your intuition and knowledge about your business.
Here is a 5-step process you can use to create cash flow projections
you can trust.
1. The Near Future Almost Always Looks a Lot Like the Recent Past.
The starting point for creating accurate cash flow projections is to
have the last six months of actual results in front of you. You have a
perfect view into what the cash flow is likely to be because you have
the last six months of actual cash flow results there to look at.
You will be amazed at how this principle will help you create
accurate projections. It also helps make the process so much easier and
faster for you.
2. Consider What is Changing.
Is anything in the business changing right now in a significant way?
If you just negotiated a 10% discount in the cost of a product you
re-sell to your customers, then you should consider whether it should be
reflected in the month you will experience the reduced cost.
The key here is to make sure it is significant enough that you are
certain of its impact. Otherwise, it would be better to see the impact
in your actual results before including it in your projections.
3. Be Conservative.
One thing about a projection you can be certain of: it will not be
perfectly accurate. You can be 100% certain that the actual results will
vary somewhat from what you project.
The trick is to get close.
It's like meeting someone for lunch. You agree to meet a good friend
at a restaurant at 12:00. You set 12:00 as the time to meet so you will
both be there at about the same time. You set a very specific time so
there is no confusion.
Despite the precise time you set, you know that both of you will not
show up at exactly 12:00. The only question is whether you will be there
a little before 12:00 or a little after 12:00. Will you be early or will
you be late?
It's the same with your cash flow projections.
4. The 90% Test.
Here is a simple test that will work wonders for you.
Are you 90% sure the cash balances will come in at or better than you
projected? The key here is the phrase "at or better than you
projected". If you can answer yes to this question with confidence,
then your projections are sufficiently conservative.
5. Use the "Smell Test".
Take a look at the projections again. Look closely at the resulting
cash balances. Are they in line with your general expectations? Are they
in line with the actual cash balances over the last six months?
Give the projected cash balances the "smell test". The
smell test is a quick way to make sure everything smells right. It's a
way to make sure nothing unusual or unexpected has made its way into
It's like picking up a pint of milk from the refrigerator. It's not
a bad idea to give it the quick smell test to make sure you are not
about to pour yourself a glass of soured milk (better to smell a problem
in advance than taste it in the present, right!).
Taking Control of Your Cash Flow
Your cash flow projections provide you the visibility you need to
make more profitable business decisions.
You can regain control of your cash flow
by creating and maintaining cash flow projections.
You will be surprised at how this simple process can transform the
way you manage your business.
FOR STARTING A BUSINESS
What are all the
things you need to do to get your new business up and
running? To make it easy for you we’ve prepared a
checklist which covers the main things you will need to
take care of.
The Key tasks are:
- Prepare a Business plan
- Form Professional Relationships
- Set up the Business.
It may be useful to download and print the
For Success -a do it yourself kit for developing your
own business plan either as a whole document (PDF
947KB) or by smaller chapter sections. (Further copies
of this publication can be obtained in hard copy or on
CD-ROM from New Zealand Trade & Enterprise 0800 888
555, or by emailing BIZ at info@BIZ.org.nz)
Choose a legal entity (sole proprietorship,
partnership, or company)
Talk to your lawyer and accountant about this – see
the Inland Revenue website for information on business
Use the online services at the New Zealand
companies’ office for information on registering a
company or company name
Create your business (register your name,
incorporate the business, etc)
Your lawyer or accountant can assist with this or you
can use the online services at the New
companies’ office to register a company or company
Select an accountant
Talk to other business owners for recommendations. Look
in the Yellow Pages
consult the Institute of Chartered Accountants website
for information on selecting an accountant
Select a banker
Make sure that your banker is interested in your
business and keep them informed of your plans and likely
If you need financing then it is essential to have a
well thought out and professionally presented business
plan. Sources of finance can be your family, bank, a
business partner or Venture Capitalist. See the vcapital
website for information on seeking finance from a
venture capitalist or business angel www.vcapital.co.nz
and information on the Escalator service at
Establish a line of credit
Select an insurance agent
Talk to other business owners for recommendations, look
in Yellow Pages www.yellowpages.co.nz,
consult the Insurance Council web site for a list of
Obtain business insurance
Your business insurance should include your premises,
stock, public liability and income
addition there are a number of specialist products
available depending on your business type. See the
Insurance Council of New Zealand website for information
about commercial insurance: http://www.icnz.org.nz/consumer/commercial/index.html
Organise business cards and letterheads
Secure a lease over, or purchase, your premises
Always consult your lawyer before negotiating or signing
any lease agreement.
Acquire all necessary furniture and equipment
If part of your equipment is a vehicle, then you will
need to keep a log book so you know how much you are
allowed to claim. For an example of a Vehicle Logbook
Obtain all necessary licenses, permits and
Consult your local council and industry groups for
information on compliance issues. Make sure also that
you comply with any Health and Safety issues. For
further information on this, download the fact sheet Taking
All Practicable Steps which can be found at: http://www.workinfo.govt.nz/documents/uploads/allpracticablesteps.pdf
Register with Inland Revenue
You must obtain a tax number for your entity for the
recording and payment of business taxes, PAYE for
employees, GST and ACC levies. Your accountant can help
with this. Check out the Inland Revenue website for
information on requirements: http://www.ird.govt.nz/business-info/starting/irdnumber.html
To apply for an IRD number you need to fill out an
application form. You cannot complete this online, but
to save you ringing up IRD you can download the
application form at: https://www.ird.govt.nz/library/publications/geninfo/ir595.pdf
If you want to register for GST, then you can do this
online at: https://www.ird.govt.nz/cgi-bin/form.cgi?form=ir360
If you would like more information on your decision
to register for GST, then you can view and print the
document GST – do you need to register? at: https://www.ird.govt.nz/library/publications/business/ir365.pdf
Join a professional organisation (your local
chamber of commerce, your industry association)
for a list of all Chambers of Commerce in New Zealand.
for employers and manufacturing associations (they have
merged). There are others including retailers, tourism,
agriculture, farmers etc. Most industries have their own
association or support group.
Make sure that your suppliers know you and understand
what you intend to achieve with your business
Only hire staff when you start up if you have to and
have discussed this with your accountant, lawyer and
preferably an employment consultant.
If you do decide to employ staff, you must registeras
an employer. This is so the IRD can send you the right
information each month (such as the PAYE forms for your
staff). You can register on line at: https://www.ird.govt.nz/cgi-bin/form.cgi?form=ir334
If you do hire staff, then you will also need an
accident register to document anything that happens
harm staff. The accident register does not
have to be kept in any particular format and can
bedocumented on your own forms or photocopies of OSH
forms. For an example of an incident and injury report
form visit: http://www.acc.co.nz/injury-prevention/safe-at-work/worksafe/action/incident-investigation/example-one.pdf
Set up accounting information system
Discuss this with your accountant. There are many
suitable computerised options available but you can
waste a lot of time and money buying the wrong package.
At the very least you will require a cashbook to keep
track of all your income and expenses. You can view an
You will also need a petty cashbook for small amounts
of purchases (like milk for the coffee). For an example
of a Petty Cashbook visit: http://www.ird.govt.nz/business-info/running/recordkeeping/pettycashbookillustration.html
Set a starting date
Go for it, and good luck!
INLAND REVENUE DEPARTMENT PUBLICATIONS
You may find some of the
following publications useful.
- Explains the depreciation rules, including detailed schedules of
assets and their depreciation rates.
- Explains the process to follow if you want to dispute a tax
assessment or some other determination.
a Notice of Proposed Adjustment
- If we send you a notice informing you we are going to adjust your
tax liability, you can dispute the notice. This booklet explains the
process you must follow.
- Explains the tax obligations of anyone who employs staff. Employers
registering with Inland Revenue will receive a copy of this booklet.
- Explains the tax obligations of schools and other education
centres. Covers everything from kindergartens and kohanga reo to
universities and polytechnics.
- Covers the tax treatment of business entertainment expenses.
- This booklet covers the tax responsibilities for organisations that
receive a grant or subsidy.
- This booklet is for business people and investors. It explains what
is involved if you are audited by Inland Revenue, who is likely to be
audited, your rights during and after the audit, and what happens once
an audit is completed.
- Explains what provisional tax is, and how and when it must be paid.
- A general introductory guide for businesses and non-profit
Obligations, Interest and Penalties
- An introduction to the rules for business people applying from 1
CARD FRAUD- 21 TIPS TO PROTECT YOURSELF
Although credit card fraud is certainly on the rise -- and credit card
fraud on the Internet is rising even more dramatically -- many savvy Internet
shoppers know that the reality is that it's actually much safer to enter your
credit card number on a secure online order form than it is to give your
credit card to a waiter at a restaurant.
After all, what's to stop the waiter from writing down your credit card number
and placing orders on the phone with it later?
And research shows that the rate of fraudulent purchases made by cell phones
is much higher than credit card fraud on the Net.
Nevertheless, you are encouraged to take precautions when giving out any
confidential information (including your credit card number) over the
Internet, over the phone... or anywhere else for that matter!
Always use common sense -- it is the best rule of thumb.
Nonetheless, below are 21 tips to protect yourself from credit card fraud ..
First though, it is important to be aware of a prevalent , and much less
publicised , aspect of credit card fraud: the dangers of credit card fraud
for businesses who accept credit cards over the Net.
You can read more about 'Eight
Sure-Fire Strategies Any Business Owner Can Use to Reduce Credit Card Fraud'
by clicking here.
21 CREDIT CARD FRAUD PREVENTION TIPS
1. Keep an eye on your credit card every time you use it, and make sure you
get it back as quickly as possible. Try not to let your credit card out of
your sight whenever possible.
2. Be very careful to whom you give your credit card. Don't give out your
account number over the phone unless you initiate the call and you know the
company is reputable. Never give your credit card information out when you receive a
phone call. (For example, if you're told there has been a 'computer problem'
and the caller needs you to verify information.) Legitimate companies don't
call you to ask for a credit card number over the phone.
3. Never respond to emails that request you provide your credit card info via
email -- and don't ever respond to emails that ask you to go to a website to
verify personal (and credit card) information. These are called 'phishing'
4. Never provide your credit card information on a website that is not a
5. Sign your credit cards as soon as you receive them.
6. Shred all credit card applications you receive.
7. Don't write your PIN number on your credit card -- or have it anywhere near
your credit card (in the event that your wallet gets stolen).
8. Never leave your credit cards or receipts lying around.
9. Shield your credit card number so that others around you can't copy it or
capture it on a cell phone or other camera.
10. Keep a list in a secure place with all of your account numbers and
expiration dates, as well as the phone number and address of each bank that
has issued you a credit card. Keep this list updated each time you get a new
11. Only carry around credit cards that you absolutely need. Don't carry
around extra credit cards that you rarely use.
12. Open credit card bills promptly and make sure there are no bogus charges.
Treat your credit card bill like your bank account -- reconcile it
monthly. Save your receipts so you can compare them with your monthly bills.
13. If you find any charges that you don't have a receipt for , or that you
don't recognize , report these charges promptly (and in writing) to the
credit card issuer.
14. Always void and destroy incorrect receipts.
15. Shred anything with your credit card number written on it.
16. Never sign a blank credit card receipt. Carefully draw a line through
blank portions of the receipt where additional charges could be fraudulently
17. Carbon paper is rarely used these days, but if there is a carbon that is
used in a credit card transaction, destroy it immediately.
18. Never write your credit card account number in a public place (such as on
a postcard or so that it shows through the envelope payment window).
19. Ideally, it's a good idea to carry your credit cards separately from your
wallet -- perhaps in a zippered compartment or a small pouch.
20. Never lend a credit card to anyone else.
21. If you move, notify your credit card issuers in advance of your change of
IF YOU SUSPECT CREDIT CARD FRAUD
If your credit cards are lost or stolen, contact the issuer(s) immediately.
Most credit card companies have toll-free numbers and 24-hour service to deal
with these emergencies -- they are eager to avoid credit card fraud.
It is the usual law that, once you have reported the loss or theft of your credit
card, you have no more responsibility for unauthorized charges.
If you follow all these tips, it will go a long way in protecting you from
credit card fraud.
provided in this email newsletter is for informational purposes only.
McLean and Co. accept no responsibility for the opinions and information
expressed in the information provided and it is provided "as
is" without warranty of any kind. The user
assumes the entire risk as to the accuracy and use of this document.
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