Planning is often talked about, occasionally entered into and almost universally ignored. Why?
The most important element of running your business is to make
sure you stay in business and, ultimately expand your business if
In order to do this with a degree of assurance you need to know how you are performing and if you are on track.
Essentially this is what planning is about -
laying out a track to run on and having something to be measured against.
The trouble is everyone knows that if you "fail to plan you plan to fail" so with good intention every year either, as a New Years resolution or because our Bank Manager has suggested it, we sit down to write our annual plan - but then the real world appears and Mrs Bottomley's Persian Cat presents itself suffering from xxxx just as you were finding a quiet time to attempt the 1998 cashflow.
This is always the challenge - Is planning your business important enough for you to make the necessary time and space and acquire help where required to complete the task? or will the Cat beat you ?
Corporate Management Services Group specialise in the management of the small to medium size business and have recently concentrated on practice management within the Veterinary profession.
We will be writing a series of articles on a range of subjects including a Unique Computerised Management System that is just coming off the production line, designed by a Vet for Vets (with a little help from the accountancy profession!).
Our total package has been designed to take away every mundane aspect of planning, monitoring and administrating the modern Vets practice. It is simple to use and highly effective in measuring results of all the "Key Drivers" of your business - these are the aspects that are central to maximising profits.
To begin with, however, this first article focuses on the financial aspects of running a successful practice:
Each section covers simple examples of how to make the most of business finance opportunities for your practice.
Whether you wish to extend your current practice or buy a new one you will probably need to raise capital to achieve your goals. Even if you do have the cash to fund such a project it may still be beneficial to borrow the funds rather than use your own.
Most lenders are very keen to lend to the professions which means that some very good packages are available. It is not unusual to find a bank offering funds at 1.5 % over current base rates and in some cases you can borrow 100% of the funds required (sometimes unsecured where repayment capacity is clearly proven), thereby not having to find a hefty deposit from your own resources.
This type of finance also covers new partners buying into an existing practice or buying out a partner who wishes to leave a practice.
The main criteria for any lender is that the business is profitable and that the last three years accounts are available and you can demonstrate a sound business. In addition the partners of the practice would have a solid track record in the industry.
It is good business sense to regularly ask yourself if you are paying a competitive rate of interest for any money you are currently borrowing. It is common to find people who set up their practice in the late eighties and early nineties with long term loans having interest rates well in excess of those available today.
It is reasonable to say that you should not be paying more than 3% over current base rate, if you are then you should look at alternatives as a matter of urgency. We are not suggesting you continually chop and change your lender because that can be expensive especially if there are early redemption fees and it may be sensible to develop a long term relationship with your bank. However it does no harm to let them know you are aware of what is available and keep them on their toes.
Earlier this year we advised a three partner practice to review their borrowing and we were able to shave 2% off their borrowing from their own bank. Before we advised a change we approached their bank on their behalf and immediately were offered the same deal. Thus there were no bank charges for switching and a huge saving!
You will inevitably, either when you start up or perhaps expand, need to purchase expensive equipment.
One approach often used these days to obtain finance for equipment purchases and repay them over a 3-5 year period. This is called asset finance and there are a number of different types of this finance ranging from Hire Purchase (HP) to Leasing.
The main difference is how the ownership of the goods is structured in the agreement throughout the term of the loan.
There is also an accounting impact with VAT - whichever option is taken. The most important aspect to be aware of is to know that there are a number of options available and to get Independent advice and not rely on any one lender. Once again, lenders are very competitive in this field and keen to lend at highly competitive rates.
An area of asset finance that is often overlooked is raising cash on an existing asset already owned by the business. There are a number of lenders who arrange a 'sale and leaseback' of the equipment with repayment terms up to five years. You can normally expect to raise up to 80% of the assets current value.
This is an excellent way of boosting a small cash flow problem or clearing an overdraft.
Finally, a little known fact is that there is a whole new range of quality lenders who have recently entered the market to compete directly with the Banks and often at unbeatable rates. These lenders generally can only be accessed through specialist consultancy firms like CMSG who, being totally independent, work for you as the client and not a financial institution.
It pays to have a financial review and get independent advice.
This article was compiled by The Corporate Management Services Group (CMSG).
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