Data watch - what happened to business investment in the UK recession?
A recession is typically associated with a reduction in business investment (capital expenditure). What does the data show in terms of the total capital spending by UK firms during the recent recession?
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Strategy in a recession - Don’t Panic Mr Mainwaring!
One of the key lessons from the recent recession is a need for firms to take a much closer look at how their business really operates. Those that really knew their business - their strengths and weaknesses (their competitive position) - have usually been able to respond successfully. Those that were caught by surprise have been badly hurt, or worse.
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Cash management becomes a strategic priority during the recent recession
Effective cash and working capital management has become a key strategic priority during the last 12-18 months according to a major survey of over 300 companies by accountants KPMG.
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UK companies conserve cash in the recession - bad news for shareholders?
“Cash is king” in a recession and in 2009 UK companies took the opportunity to retain as much cash as possible by reducing the level of dividend payments by around £10 billion (or 15%) compared with 2008.
read more...»Revision Presentation - Profit and Cash
Profits are not quite the same as cash flow in most businesses - though they are often close. Students often get confused between the two. This revision presentation outlines the essential differences.
Launch revision presentation on the difference between Profit and Cash
Revision Presentation - Improving Cash Flow
What are the causes of cash flow problems and how can a business manage its cash flow more effectively? This revision presentation looks at those questions, covering topics such as the basics of working capital management, bank finance, factoring, sale and leaseback and sale of assets.
Launch revision presentation on Improving Cash Flow
Source of finance - SMEs turn to the private alternatives to banks
A fascinating piece of research on the sources of finance used by small businesses has hit my desk this morning. Great materials for Edexcel/AQA GCSE Unit and for AQA BUSS2 - the textbooks look even more outdated now!
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Excel AS Teaching Resource: Cash Flow Forecast
Free interactive Excel files designed to teach AS students how to apply the concepts of cash flow. These files are designed to automatically inform students as to whether their answers are correct using prompts. Negative cash balances turn red to facilitate students understanding of overdrafts / cash flow. Ideal for BUSS1. Three files are available. A low ability version, a teacher suggested answer and a higher ability question utilising ‘what-if’ analysis.
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Q&A - Is there an optimal level of gearing?
Gearing varies from firm to firm and from industry to industry. It is important not to rush to judgement about the gearing level of a business without considering other factors such as profitability, liquidity and the competitive position of the business.
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Cash flow problems and the business of dying
This video addresses a sensitive, but relevant business issue - the rising level of amounts owed by families to funeral directors as a result of the recession…
read more...»Cash flow Clue-doh! The Mystery is Revealed…
Over 1,500 colleagues have now downloaded our cash-flow murder mystery activity - Cash Flow Clue-doh! And we’re getting an increasing number of enquiries asking what the solution is!
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Managing Cash Flow - Beware the Economic Recovery
An excellent recent article in the ACCA magazine examines an interesting phenomenon - more businesses collapse at the beginning of a recovery than during the depths of a recession. Its all to do with working capital…
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A Day in the Life - Cash Flow Forecasting
This is a good starter activity for cash flow forecasting.
At the start of the lesson, I tell students that I am going to tell them what I did on the previous Saturday, ‘a day in my life’, and that they need to listen carefully.
I start off by saying something along the lines of, “I get up, get showered and get ready. I have £30 in my pocket. I walk to the metro station and on the way buy a newspaper and a bottle of Diet Coke costing £1.50. The metro costs £4.00 into town...”
I then describe a number of instances where I spend cash and receive cash. For receiving cash I say that I am returning some clothes to a number of shops and that I meet my brother who gives me back some money he owes me.
I then ask the kids to tell me how much money I have in my pocket at the end of the day.
Bingo. A mini-cash flow statement.
You normally need to do it twice and it works brilliantly with mini-whiteboards if the kids write down the ‘cash in’ and then the ‘cash out’.
I then move into ‘formal cash flow’.
The kids like it and you can make your day as ‘interesting’ as you like.
Enjoy..........
‘I read the news today, Oh boy’
Workforce planning - getting ready for swine flu
The swine flu pandemic has the potential to cause substantial disruption to the operations and workforces of many businesses - large and small. Forget the media hysteria. Employers around the UK are now being given direct advice on how to prepare for the potential storm…
read more...»Small businesses waiting for the upturn
The ten small businesses which are being followed by the BBC month-by-month throughout 2009 are remaining defiantly optimistic, with most of them reporting confidence ‘marks out of ten’ at the same level as May, and three of them more optimistic this month. Many seem to benefit from being in a niche market with very specialised products meaning they can really focus on their customers. They talk of expanding sales and taking on more staff, and some increased interest in UK products and producers. The hotel on the Isle of Wight is benefitting from sterling’s weakness this year causing an increase in holidays in the UK.
Several have changed their cost structures and looked for ways to strengthen their cash flow, for example by reducing reliance on credit for payments, and are hanging on and managing to break even while they hope for increased business in the near future, and there are concerns about how they will cope when interest rates rise again. There is still difficulty for those businesses which are related to the housing market, as solicitors or suppliers of joinery, and the most consistent worries remain those related to finance – lack of credit from the banks, lack of mortgages available to potential buyers, and poor credit ratings given to any relatively new small business regardless of their history.
Cashflow-Cluedoh!
Our murder mystery game for cash flow analysis is now available to download…
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How not to run a business - the Gordon Ramsay way
This might be well worth adding to your scheme of work as an up-to-date, celebrity-fuelled example of how a business can run into cash flow and other problems from over-expansion.
read more...»Q&A - Why are start-ups vulnerable to cash flow problems?
Start-ups and small businesses are especially vulnerable to cash flow problems. Here are some of the main reasons:
read more...»Why businesses fail - an interview with Pepita Diamand
We featured the Wrapit business story in our AQA AS Business Unit 1 revision workshops in December 2008. Students were asked to evaluate two alternative business start-ups - one of which turned out to be the failed wedding gift lists service Wrapit. Now the co-founder of Wrapit has given an in-depth interview which provides a rich source of insights for our students into why businesses fail…
read more...»Q&A - Why is leasing and hire purchase a source of finance?
Leasing is another word for renting assets (e.g. property) over a period of time. Leasing is a way of financing the use of such assets without actually having to buy them outright.
read more...»Q&A - Why are trade creditors a source of finance?
When a business buys raw materials, components, services or other goods from another business it will often look to pay for those at a later date. If it is allowed to do so, then that supplier is said to offer “trade credit” to the business. The supplier becomes a trade creditor – someone to whom the business owes money.
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Cash flow management - chasing the late payers
AS and A2 students are likely to come across a scenario or two where the case study business is suffering from slow payment of invoices by customers who bought on credit (so called “trade debtors"). An interesting survey out today suggests that small businesses in particular are being more aggressive in chasing up long-standing debts - as the need to maximise cash flow becomes the number one business priority…
read more...»Small businesses in the middle of the crunch - insights for students
Lots of business surveys around at the moment provide insights that the savvy AS business student might bear in mind as they do their revision. A particularly useful one is just out from O2…
read more...»Football finances under the spotlight
The troubled finances of football clubs comes under the spotlight again this weekend - this time in an article in the Observer…
read more...»Q&A - What is cash flow?
Cash flow describes the movements of cash into and out of a business
read more...»Credit Insurance and Retailer Cash Flow
A fantastic 8-minute video from Newsnight is ideal for A2 students looking at the causes of cash flow problems - particularly for retailers…
read more...»Cash flow management - dividends in the spotlight
For Eurotunnel shareholders, it has been a long wait. But they have finally received a dividend, some 22 years after the Channel Tunnel was opened. However, shareholders of other quoted and private companies may not be so lucky…
read more...»Update on how 10 small businesses are weathering recession
January was a difficult month for BPL Solicitors, one of the 10 small firms that the BBC website is following throughout the recession. With the practice specialising in property law, it has been particularly affected by the downturn in the housing market. Last month it told staff it will likely have to make some redundancies. HMS Joinery is also dependent on the housing market and so business is falling – its owner Harry Murray says his confidence in the business is only 3 out of 10, down from 4 out of 10 in December. These two businesses are likely to find that the latest housing market figures, to be released later today, will not bring them any relief.
read more...»More flak for the banks from business customers - what have they done with bail-out cash?
In File on 4 this week, there is more criticism of the banks. The programme investigates the ‘lending squeeze’, meaning that banks who have received huge amounts of bail-out cash from the government are not handing it on as loans to help small businesses. This was intended to be a condition of the help that the government extended to the banks, in order to help keep the wheels of the economy moving. Small businesses often need cash to help them through periods when they forecast negative cash flow – there is a clear pattern that businesses are finding it ever tougher to borrow, even if they are well established and have a good record and working relationship with their bank.
read more...»Businesses counting the cost of the snow
Firstly, a warning - anyone who still believes that too much fuss has been made aobut the snow this week should probably not read the rest of this item!
Which businesses have suffered losses as a result of the snow on Monday? Walking up to my local high street on the last two days has shown some big contrasts – on Monday most shops were shut except the local supermarket which had completely sold out of milk, bread, fruit and vegetables - and no newspapers had been delivered. The pubs, though, were doing a roaring trade (so I am told!) and the bakers had a sign in the window saying their next batch of hot, fresh bread would be ready at 1.15. Today was a bit different – most shops were open although it was clear that some, like the butchers, had not received any deliveries. There was still very little traffic around, and a notable lack of electricians or builders vans out and about.
read more...»In a recession - cash is King!
There is an old saying that “profit is a matter of opinion, cash is a matter of fact.”
How true this is as the economy staggers into a damaging recession. Well known high street retailers, airlines, numerous soccer clubs, farmers, suppliers to the building trade and multi-national car manufacturers have all been featured in the media recently as examples of “cash strapped” businesses whose future is in doubt because of rapidly draining cash balances.
read more...»Small businesses call for cap on credit card costs to ease finance squeeze
The most common source of finance for start-ups and small businesses is a credit card - either that of the entrepreneur founder or provided by the business’ bank. So it comes as little surprise that small business leaders are calling on the government to prevent credit card companies from charging penal interest rates during the Credit Crunch. This article in the Telegraph explains more about the FSB’s campaign and also has some useful commentary on other initiatives to ease SME cash flow problems during 2009.
Teaching cash flow management with Cash Flow Clue-Doh!
A few weeks ago, we introduced a new tutor2u resource designed for delegates at our AQA AS Business Unit 2 Teacher Workshops. Cash Flow Clue-Doh! is a cash flow-based murder mystery game which encourages students to discover the clues that help solve the question “why did Peston Plastics go bust"…
read more...»Revision Quiz - Improving Cash Flow
This revision quiz focuses on the basics of managing cash flow, including introductory concepts of working capital management.
Launch interactive quiz on Improving Cash Flow
Proposals to help firms with cash flow
As business conditions get tougher, Conservative leader David Cameron has told The Observer newspaper that the government should allow small businesses to defer paying their VAT bills for up to six months.
He also urged local authorities to pay small businesses for their services within 20 days, rather than the usual 30.
read more...»Cash is king for small businesses in the downturn
An interesting piece in The Telegraph suggests that small businesses are looking to maximise their cash balances as a key part of surviving the economic downturn…
read more...»SMEs should stand up to the large business bullies
Small businesses are being bullied by their much larger competitors when it comes to making late payments for amounts due…
read more...»Cash flow problems could mean its a wrap…
Are we about to see the return of the dot.com bust as online businesses also struggle to handle the consumer downturn?
read more...»Credit crunch gets personal for small business owners
A common source of finance for small businesses is an unsecured bank loan taken out by the entrepreneur which gets invested in the fledgling business. Now the credit crunch threatens to make life very tough for this kind of finance.
read more...»Woolies slashes dividend to conserve cash
Another example of a quoted company deciding to cut its dividend in order to retain cash in the business. Except that this time, Woolworths plc has cut its final dividends by 90%
read more...»Late payment is strangling the cash flow of small businesses
We had a good day for customer cheques and BACS payment today. However, a new report from Barclays suggests that we are lucky. Small businesses are being submerged under the increasing burden amounts owed by trade debtors.
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