Cash Flow Chaos (Eps1) (Video)

You're flat out. The work keeps coming in. You've got staff, you've got jobs on the books. So why does it feel like there's nothing left at the end of the month?

In this episode, small business podcast, Crystal and Kay dig into one of the biggest frustrations in small business: being busy but not profitable.

They talk through why this happens, including pricing that doesn't stack up, growing without keeping an eye on the numbers, and the difference between cash flow and actual profit.

If you've ever looked at your bank account and thought, "Where did it all go?", this one's for you.

In this episode, we cover:

• Why busy doesn't equal profitable
• Common pricing mistakes that eat into your margins
• The difference between cashflow and profit (and why it matters)
• Simple steps to start getting your finances under control

Crystal and Kay also share our no charge Cashflow Chaos Checklist you can download at https://businessgrowthcoach.com.au/resources/

shows at the beginning of each episode for 15 seconds

Connect with us:
Crystal Petzer - https://businessgrowthcoach.com.au/
Kay Godfrey - https://upupandaway.net.au/

Radio Northern Beaches 88.7 or 90.3 FM - https://www.rnb.org.au/
Email us - radio@businessgrowthcoach.com.au

Facebook - https://www.facebook.com/profile.php?id=61590811295505
Instagram - https://www.instagram.com/small_business_sorted/

If this episode hits home, share it with a business owner who needs to hear it.

Transcript

SPEAKER_01 0:18

Well, okay. Our topic for today is one that we really like talking about. Um, and that's that one where, and I I don't know about you, but I've had a few clients recently bring this up again. But that is I'm working so hard and I just can't see the profit or the cash. Or I don't know, I feel like there should be a lot more cash in the bank account and I just can't see it. Or they feel as though they're working for nothing. Or they feel like they're working for nothing. Which is dreadful. I'm working seven days a week. I haven't never had more work. I've got all these guys working for me, three, four staff. And yet, where is that money? Exactly. And often we talk about profit and um cash flow and and how we all get mixed up in that as well, right? Right. It's a tricky thing, isn't it? It's not something you it's something you've got to learn how to deal with in small business, and it's often stuff that we don't know, right? Exactly. So welcome to our podcast. Um this is Kay, and you're with Kay and Crystal, and we're small business sorted, and we help take the chaos and get more clarity in what happens in small business.

SPEAKER_00 1:27

And if you're running a small business and thinking this is really harder than it should be, you're in the right place.

SPEAKER_01 1:34

Yes, we're in the right place. And we can and look, how long have we been doing this for? A long time, haven't we?

SPEAKER_00 1:40

For a while. Yeah. Maybe longer than I have.

SPEAKER_01 1:43

Maybe a bit longer, yeah. And um, but we've we've shared many, many stories between us and have quite a lot of experience on all of these things that people feel. So the the the story that I was thinking about that that is really top of mind for me is that I I actually did have a client in last week and they were talking about um how they've been working like he said, I've never been busier, and I've never had more staff. I feel like I'm invoicing really well, and I feel like I'm in a really great place. But every time I look at my bank account, I just can't see where the money is. And you know, that the the the feeling of dejection and the feeling of not failure, but like, what am I missing? You know, like I don't get it. Like, why does this have to be so damn hard? And it just sort of, it's such a great topic, and it's got there's so many nuances to it that it's really hard to uh so I get you know, I just sort of said, okay, where do we start? You know, like um let's have a look.

SPEAKER_00 2:50

It helps to look at your numbers. You might be feeling as though things you're really busy and feeling, well, you'll know if you've got cash in the bank, but you may not know if your business is profitable. So the important thing is to have some kind of a system for recording your sales expenses, and then you can really look and see how well your business is doing. It may not be doing well, yeah. It but it may be doing really well.

SPEAKER_01 3:19

That's an interesting thing because I think I come across so many people that don't have like, okay, let's call it zero. It could be quick books or whatever. Definitely not a bio fan. But um, it's good, like let's let's say zero for this one. Um, and I often say, well, how are we going with tracking everything, right? And then so often that's the place I would start and say, look, we need real figures to get real clarity in it, right? So um, and I think knowing your numbers, as you say, and having that clarity is important, but how do you get that to that level of place where you where your numbers have to be really good, right? So then you can start to understand.

SPEAKER_00 3:56

You have to keep them up to date.

SPEAKER_01 3:58

You have to keep them up to date.

SPEAKER_00 3:59

There's no point in having numbers um that are old, outdated.

SPEAKER_01 4:03

Or if you're doing it yourself and you don't know what you're doing.

SPEAKER_00 4:05

True. If you don't know what you're doing as well, that can be a bit of a problem.

unknown 4:09

Could be a problem.

SPEAKER_00 4:10

But um, no, you you definitely just keep them up to date. A lot of people can do it themselves. Yeah. A lot of people don't or don't want to.

SPEAKER_01 4:17

Yeah.

SPEAKER_00 4:18

Um, it's that's entirely up to you and um how capable you feel. Often it's better than that.

SPEAKER_01 4:24

I think it's accuracy that you're looking for more than anything, right? So that when you you gotta feel like and I know many, many, many clients don't feel like they could trust their numbers and they go, I don't know, I look at this, uh, this profit and loss doesn't seem real to me. Or I don't know, it doesn't look right, or whatever. And then that's probably a really good place to start to have a look at are your sales right for that month? And I guess knowing what your figures are and you feel that your figures are accurate, then we can start looking at why is the cash not there.

SPEAKER_00 4:56

Then we can look at why they're making it.

SPEAKER_01 4:58

Unless you had don't have that, you don't know what you're looking at, do you? I mean, it's all you're all guessing, guessing everything, and um oh, I just all have it in your head, or you think you're doing better than what you are, or whatever it is.

SPEAKER_00 5:10

Another reason for not having enough cash, and I hate to say it, is a lot of small business owners, especially sole traders, will take money out of their business.

SPEAKER_01 5:20

Well, like the drawings.

SPEAKER_00 5:21

Yes, for personal use.

SPEAKER_01 5:23

What is that all about? I've got I had someone say to me the other day that I don't do wages because I'm not a PDY limited. I have to take it out as drawings. I do.

SPEAKER_00 5:35

But then guess what?

SPEAKER_01 5:37

That's not showing on your PL, right?

SPEAKER_00 5:39

So you have to look at your drawings account on the balance sheet.

SPEAKER_01 5:42

That's right. So when you talk balance sheet and profit and loss, then everybody's eyes glaze over, right? Even I go, oh God, now I've got to go find the balance sheet. Jeez. And often balance sheets aren't always as accurate as you'd like. And also it's only showing you the amount that's there now. There's no record or history in it.

SPEAKER_00 5:58

When I'm talking about drawings, though, I'm talking about yes, you can take a wage. You could put wages on your PL, can't you? You could do it that way. I mean, the account just takes it all as it's probably not a bad idea to do that. Yeah, to track it. What I'm saying is people will go to a restaurant and use the same card. The money is coming out of the cash in your business. So if you feel like you've got no money in the business and no cash, please don't take money out of the business for things like that. If you need to transactions, did you see going on? Oh, and the other thing is I'm going to get, I'm going to get, yes, you got hit one of my pain points as a bookkeeper. It it also there's more transactions going through that bank account. It's it's actually a headache for a bookkeeper. Because we So what's the answer? Don't do it.

SPEAKER_01 6:52

Well, or get a business credit card, right? Yeah. Or use a different card for Yes, yes. Well then, then have a have a business account?

SPEAKER_00 7:01

Or have a personal account, a business account, transfer money as wages to your um personal account and then spend it out of there. And don't have that account.

SPEAKER_01 7:11

And then that then that sorts out the business, how much is in the business and how much is in your personal wage. And then you can start to budget a bit better on both, right?

SPEAKER_00 7:18

Now I'm going to broach a subject that you always broach. What's that? The subject of what you call cashies, which you know I hate. But it's a reality that it does happen, right?

SPEAKER_01 7:30

Yeah. I mean we can't we can't hide.

SPEAKER_00 7:32

It can also be a reason a reason you don't have cash in your business because you're taking money from clients, allowing them to pay cash and spending it.

SPEAKER_01 7:43

Yeah, so so let's define cashies, right? Or cash. Taking cash from a client and not depositing it into the business, right? Is kind of what it's so there's no there's no record of that sale actually ever going through. So so so when you're looking at your figures on your profit and loss, right? That means your sales figures will be less because that cash ye isn't recorded in there. Correct. Or if you have recorded it in there and you haven't taken the money, then is that is that a bad debt? I don't know. But but then but your sales generally are not recorded. So that means your sales are down.

unknown 8:20

Right.

SPEAKER_01 8:20

So then you're showing less of a profit. Correct. Then that money generally doesn't get spent on the business because it's just hot in the pocket, right? So it goes, I don't know, for a beer, could go for a coffee, it could go for eating out, it could be for lunch, could be anywhere, right? And how fast do we does that money go out of there, you know?

SPEAKER_00 8:40

Quickly.

SPEAKER_01 8:40

Really quickly. And then so I've we I've got I had a client who literally, I don't know, they were doing anyway, they they were doing renovations at their house, whatever, and they were taking a lot of cashies out of the business. And then they ran into some really, really, really bad cash flow problems because they had more expenses in their business because of all the materials they were buying. I think their staff. It was the same client. Um, but anyway, but it it got they they got themselves into a really, really, really big trouble. And it took a while for for us to work through all of that and then to actually work out exactly how much money was actually should have been in the business that hadn't been taken out. And it actually the business would have been profitable had they not done that. So that was a bit of a reality check as well. Yeah, but I think um, I don't know, cashies is is a thing that a lot of people do. It's easy. A lot of people say, can I have a discount for cash? And so it if they make it, you know, you go, yeah, sure, you know what, 10%. Um, but I think the best way around it is that if you if you want to be if you want to be successful in business, good practices is don't do cashies. No, do put them in the business, record them and bank that money, go to the bank and put it in. I know it's a hassle, but or better still, say, nah, look, I don't I don't do cashies. Or if they say they normally ask, do you want it cheaper? You know, can I get it cheaper? And just say, look, I pay my GST the same as anybody else, and I've got to pay it anyway. So I I really don't, you know, if you want to pay me cash, that's fine, but I would prefer whatever, you know. Yeah, yeah. Um, because that is where people get tripped over all of the time, is those cashies, and then you forget where that or you have that money sitting under your bed, right? And then I there was there was a a client who actually had a cabin, uh like a granny flat cabin thing at the back. He I don't know how much money he had stashed in there under the bed, literally under the bed in a box. Um, and the cabin caught fire. Oh and guess what?

SPEAKER_00 10:51

It's gone.

SPEAKER_01 10:52

All his money gone. Although I love it, but it wasn't it wasn't funny at the time. But but that's that's also another problem with cashies, right?

SPEAKER_00 11:00

And some other another reason people may not may feel they don't have enough cash is if they haven't put aside enough cash to pay for their GST um or their tax bill. Or the super they they may have thought, oh, I've got lots of money in the bank, I'll go and buy something for the business, a new piece of furniture, a new computer, um and they go and buy it. Thinking and just looking at the cash in the bank thinking, oh great. And then they've forgotten that they've got to pay the ATO um money. And so always put money aside weekly if you can for that for those um words.

SPEAKER_01 11:41

That that someone or was it in a book that I read, or someone said that take a third of that money that you get paid, you know. So when your clients pay you, take a third of that money and put it in a in another bank account. And then that way um that's that's the tax money that you pay to the government or your super that you've got paid to the staff, or um, even workers' comp or whatever. And that should generally keep you well covered. But the problem is, right, if you're low on cash, to build up that cash takes a while. So you're always robbing Peter to pay Paul under, you're always robbing out of that account on. Once you've got into that situation, it's very difficult.

SPEAKER_00 12:21

How do you get out of that situation? It's very difficult to get out of it. Um you can enter into um arrangements with the ATO um to pay monthly, but then once you start that, it usually ends up being a bit of a vicious. Do you find that it people don't often know how much they owe the ATO?

SPEAKER_01 12:41

Also possible, yes. Also possible. Yeah.

SPEAKER_00 12:44

Yeah. So always keep that in mind. You've got to keep money aside.

SPEAKER_01 12:47

How do you find out how much you owe the ATO?

SPEAKER_00 12:50

You can.

SPEAKER_01 12:51

If you've got a tax debt, how much do you how do you know?

SPEAKER_00 12:53

You can log into your account if you want to call it at all.

SPEAKER_01 12:56

What if your accountant's got the account and you don't?

SPEAKER_00 12:59

You have to ask them. Well, you can always log into your own. Um you should be able to always log into your own. It's probably good practice to do that, isn't it? Yes. As I was talking before, saying you use RAM. Oh god, the RAM. Which is not a truck, isn't it? I can never remember what it stands for. Access memory. Random access no don't ask me. I keep I have to look every time. I have to look it up. But it's the way of accessing your account in in the ATO.

SPEAKER_01 13:27

In the ATO. And no, it's it's it's a little complicated to get there.

SPEAKER_00 13:31

Yeah.

SPEAKER_01 13:31

Um But once you have it, then you can just always I have mine where I could just click in it and it just comes up and I can look into each of the accounts. However, um, if you don't know how much you owe the ATO, and this goes back to those good figures, right? So so you know, clarity in numbers is is such a key thing. So if you know how much your sales are, you know how much profit you should be making, like your gross profit margin. So if your accounts are set up correctly and your profit and loss, you should be able to see what your gross profit margin is. And then what's left over is for your expenses, right? So gross profit margin is all your materials or your things that cost you to do business. So if you're a service business, like this podcast business, I guess, is you've got all your computer and software expenses that help you run that business. You you need that to make it.

SPEAKER_00 14:23

And if you've got staff, it would also be the staff working.

SPEAKER_01 14:26

Your staff or your subcontractors, right? And then whatever's left after that is called gross profit. And it's really important that you get your bookkeeper or your accountant to set that up correctly for your industry. Um, and then what's left is left for your expenses, right? So the other thing that that in that clarity of numbers that is missing off a profit and loss, or a PL as we call it, what else is missing off of that?

SPEAKER_00 14:52

That you can't that that aren't you won't see any lease expenses for vehicles and things like that.

SPEAKER_01 14:56

Yeah, so your vehicles often aren't on the profit and loss, right? So you might be paying, say, twelve hundred dollars a month for your vehicle lease, but that's not sitting on your PL, that is sitting on your balance sheet again. Yes, which is a whole nother different click of the case.

SPEAKER_00 15:11

We're getting too complicated, Crystal, for too complicated.

SPEAKER_01 15:14

Okay. But anyway, that just to remember that what's not showing on your PL, because your PL might say you've made $10,000 that month, but what's not been taken out is your motor vehicle lease, any drawings that you might have taken out, any caches that you have taken out. And what's the other one that's that's always on there?

SPEAKER_00 15:36

On your go back through them again.

SPEAKER_01 15:39

Uh you've got your vehicle. Yes. You've got your um drawings, your caches, obviously, that that doesn't show anywhere. Um, what else is on your balance sheet?

SPEAKER_00 15:49

Well, you'd have the ATO, the amount you over.

SPEAKER_01 15:51

Yeah, you've got the ATO debt on there as well. Um But yeah, so they are the things that you just need to make sure. So you can get your accountant to actually add that to the bottom of your PL. It sort of sits at the bottom so you could keep a track of that. And I guess your ATO debt shows on there too, doesn't it? If if it's been calculated properly. Yeah.

SPEAKER_00 16:11

Something that you should think about is once you've got your figures right, you should look to see if you are actually um charging enough for your services. You may be undercharging.

SPEAKER_01 16:23

Yeah, you may not be making a profit.

SPEAKER_00 16:24

So you can't look at that until you've got your figures up to date. But then maybe you're not charging enough. Maybe you're not making a profit, maybe your gross margin is too small or or zero. Um, so it's that's an important thing to look at.

SPEAKER_01 16:40

That's exactly a very good point because I did have a client a couple of a few years ago, now three, four years ago, and they had the same issue. He said, I don't know where all my money is. Same thing again, right? And I said, Okay, well, let's work out. And then we work, got his PL sorted out, right? So he got everything in there correctly. Wasn't too bad, but we just had to sort of massage it a little bit. And also invoicing for that month when you're paying all your expenses for that month is a good idea as well. So then you're comparing your expenses with the actual revenue that's coming in for that month. Yeah. So it matches, I think that's important. Um, and then the uh what ended up happening was we we looked at it and we said, Well, you're not making a profit. That's why there is no money. And then we realized that exactly what you're saying is that the he's he was bundling up the services that he was offering. So he would say for this particular service, it was, you know, whatever it was. But it the staff were never actually checked on how long they took to do that that particular job. So they often were taking too long. And so he was losing money on that service.

SPEAKER_00 17:49

So you have to bill for every single minute that those are a big one. So if you're not billing right, right. And you would know that as being part of a um trades business. As part of the trades business. And you have to for your admin staff, you have to bill those hours out to the jobs, so the the customer has to pay for it. If you forget about your admin costs and other costs, um, then you're not charging sufficient um for your services.

SPEAKER_01 18:20

So Yeah, and that was a bit of a shock because he thought he was charg he he actually thought his things were too expensive. So when we worked out that uh your billable hours were actually even if the even if the staff worked a bit faster than that, he would have at best broken even.

SPEAKER_00 18:35

Yeah.

SPEAKER_01 18:36

So he was way, way, way undercharging for his service.

SPEAKER_00 18:40

And don't run the risk of thinking that more sales is necessarily going to mean more profit.

SPEAKER_01 18:49

No.

SPEAKER_00 18:49

It may not. What do they say? Sales is revenue or sales is vanity? Sales is vanity, yes. Um cash flow is reality. Reality, yeah. Excuse me.

SPEAKER_01 19:03

Um yeah, cash flow is reality. Um sales is certainly vanity because everybody talks about sales. I know.

SPEAKER_00 19:10

Everybody talks about sales. How how are your sales? How well are you doing? You might not be making any money at the end of the day. So it's not how many sales or how much, it's are those individual sales. Making you a profit. Money, yes, is is the important thing.

SPEAKER_01 19:27

So again, it comes back to that clarity and in understanding your numbers again. Exactly. And that doesn't come easy, you know, if your numbers aren't accurate or you can't read anything accurate, you just don't know. And so you are looking at the bank account and you're not really knowing what's going on.

SPEAKER_00 19:43

Although we've talked a lot about it, so many people of my clients, people I know, just look at their bank account. In fact, I can I can even catch myself doing it at times. Just looking at how much money's in the bank. Um that's not what it's all about. How much money is going to be coming in? Have you built a big job you know, last week? There might be hundreds of thousands of dollars coming in still owed to you. Don't forget about those.

SPEAKER_01 20:11

Yeah.

SPEAKER_00 20:12

Um, and something else to look at. Look at your expenses.

SPEAKER_01 20:17

What about people that don't invoice in a timely manner? Uh, I come across this a lot.

SPEAKER_00 20:22

Yes.

SPEAKER_01 20:22

Well, that's they're the people who are saying, I'm feeling as though I'm working on no money in the bank where it's well, because the customer hasn't got the bill yet to pay, the invoice yet to pay. So therefore you are cash short because you haven't got that money in that you've already paid for the labor or the stuff.

SPEAKER_00 20:38

And there's so many apps these days where you can collect the money straight away.

SPEAKER_01 20:43

So you could have invoiced timely, but then the customer hasn't paid you, and that affects your cash flow badly as well.

SPEAKER_00 20:50

Again, though, there's apps that you can use where some of the trades that I know now, they go to the customer, they clean the windows or whatever they're doing. Yeah. And they before they leave, here you go, credit card number, tick, tick, tick, tap, click.

SPEAKER_01 21:06

Yeah.

SPEAKER_00 21:06

Money's a good thing.

SPEAKER_01 21:07

Yes, it's easy now to collect money on uh at the time, isn't it? But if you're not checking how many invoices I haven't been paid, right? Yes, how do you know? So, and also then how do you know how old they are? And how often do you check that? Because I know, do you know I bumped into a person once at a at a networky thing? Yes, okay. Once um, yeah, one networky thing. Um I he we were chatting about chasing up money or whatever it was, and he was saying, you know, I often forget to invoice. And I said, No way. And he goes, and I said, How much do you reckon you don't invoice a month? Right. And he was a fairly sizable business. He goes, you know, I'm thinking, and he's guessing, he goes, I think it's around twenty thousand dollars a month, but it could be probably closer to thirty or forty. And I go, no way. So I said, You're giving away thirty to forty thousand dollars of money that you've done per month just because you didn't have the Time to invoice. He goes, Yeah, I'm really embarrassed about that.

SPEAKER_00 22:19

The other thing is you can charge people up front a deposit. Oh, yeah. If you're doing a big job, deposits are good. Um in fact, as a bookkeeper, I changed my invoicing to invoice people in advance for the month. Not in arrears. I moved to fixed pricing, not hourly. So I could do that. Yes.

SPEAKER_01 22:41

And you could collect the money through direct debit as well, couldn't you? Especially for service business, that's a great thing.

SPEAKER_00 22:49

So and I don't have to worry about all of that. No. And that is available to the yeah.

SPEAKER_01 22:54

But that's a whole topic for another day, isn't it? How to uh collect money apps as well, aren't we? But that is um but that is that is something that can really affect your cash flow. So and sometimes we in we make invoicing really complicated, right? So if we don't have a good job management system to collect the information or you don't have admin helping you with the invoice, so then you've got to sit down, you've got to add up all the timesheets or the hours that you've done on the job, you've then got to find all the materials or the other contracting services that you might have used with your service business or a trade business. Um, and then you're putting all of that onto the invoice, and then you're in the back of your head, oh yeah, that's why we did some extra work and that, or we did extra hours on that, and then you're adding all that in. So it complicates it, right? Because it's all in your head, right? So no one can help you invoice, right? Number one. No. And then so, and then when you get home at night, you're going, oh, you know you're going to need at least two or three hours to invoice, and you just like you just don't feel motivated, do you? So you you know, you avoid it or you procrastinate around it. Or you put it off, and then before you know it, you're two weeks, three weeks behind, and they're chasing you for the invoice. That's another story for another day. Another day.

SPEAKER_00 24:08

Something that's sprung to mind is um people often pay wages weekly. They pay on the Monday after the Friday. Oh yeah. Why not pay staff fortnightly? Which some of my clients. Yeah, we do. We pay fortnightly. You've automatically got another seven days worth of cash in your bank. And don't pay them immediately on the Monday. Pay them on the Wednesday. Yeah. So it's a little bit more cash that you've got in the bank.

SPEAKER_01 24:40

Well, you've got time for more money to come in from clients. Exactly.

SPEAKER_00 24:43

So um that's it's just a tip. It's difficult to change once you've already started, but it's not impossible. You'd have to get the agreement with the run accounts, can't you?

SPEAKER_01 24:54

If you spend a lot of money at a particular wholesaler or supplier, you could ask them for a monthly account. So then you just pay that at the end of the month. So then that gives you a month to collect the money in from your clients as well. So then that that gives you an extra 30 days, maybe.

SPEAKER_00 25:13

I think it's TLE. They allow people TLE.

SPEAKER_01 25:18

They're the electrical contractors?

SPEAKER_00 25:20

Yes. 60 days, I think. They don't have to pay for 60 days. 60 days. Whoa, that's good terms, isn't it? It's good terms, yeah. So if you're a trade or electrical contractor. But then you've got to watch out you don't spend that money, right? But it it helps with it helps with your cash flow.

SPEAKER_01 25:40

Um that could definitely help with your cash flow. I just can't believe they they offer that in, especially in today's things. That must cost them a lot of money too, right?

SPEAKER_00 25:49

I know. They must be making a lot of money.

SPEAKER_01 25:51

Yeah.

unknown 25:52

But yeah.

SPEAKER_01 25:53

So um All right. So we've spoken so much about that. And I think we've also got talking about um that we've spoken a lot about being profit on paper, but not having the money in the bank. So there's a variety of reasons there, right? Which we've spoken about. What would be the first number to check, do you reckon?

SPEAKER_00 26:13

I would check my net profit, to be honest, if it was me. Yeah. That's what I would I would be checking, but not that alone.

SPEAKER_01 26:23

I I think for me, what I would check first is to make sure my zero is accurate. So that my PL is is accurate. Okay.

SPEAKER_00 26:33

Yeah. And that's not just one number though, that's lots of numbers.

SPEAKER_01 26:36

Yeah, yeah. But but but if I would just like r you know, glance through it and then make sure that it's accurate. Because then I could look at the net profit and go, I'm feeling a little more.

SPEAKER_00 26:46

Something that I was just thinking about. Zero, particularly, and QuickBooks, they have now got some great um dashboards. Those new dashboards. Yeah. I mean you can you can you log in and it's immediately got profit, revenue, expenses.

SPEAKER_01 27:02

How much is outstanding?

SPEAKER_00 27:03

It's it's it's it's really good.

SPEAKER_01 27:05

Yeah.

SPEAKER_00 27:06

But your figures have to be up to date.

SPEAKER_01 27:07

And accurate. And accurate, yes. And showing those caches.

SPEAKER_00 27:12

And you know, conforming to the rules.

SPEAKER_01 27:17

We talked about that margin shrinking. So that's your profit margin on what you're charging. So we have we have talked a bit about that. And I I feel that wages have gone up, cost of living and everything's gone up. So you probably find everything's gone up below the line, so to speak. Yes. And maybe your price that you're selling at is not going up at the same level as what you're so you could be making less without you realizing it as well. And that if you add up, you know, if you're doing $100,000 worth of sales and you're 10%, your your material your or your costs are 10% more. That's a lot, right? Yes. Um, so that could be quietly eating away at your margins. Is there anything else that could eat away at your margins?

SPEAKER_00 28:03

Subscriptions that you you shouldn't, you don't need to pay anymore. Ah, yeah. Is what I would say.

SPEAKER_01 28:10

That's a rabbit hole, isn't it?

SPEAKER_00 28:11

Something I've looked at myself recently. There are some subscriptions are free or included, for example, Chat GPT. I was using Chat GPT, besides the fact I got a little bit annoyed with him when he came with the wrong answer. Um, I've gone over to Copilot. It's free, free, with Microsoft 363. You're not sponsoring these people. No, no, no, no, no. Maybe we should think about that. Um, almost as good, but it I must have been not quite as good. No. But but I don't have to pay 22 US dollars a month for it.

unknown 28:44

Yeah.

SPEAKER_00 28:45

It's the same with Zoom. Zoom and Google Meet. Yeah. Google Meet is free if you only have one person that you're talking to for as long as you like. Zoom. You've been paying for them.

SPEAKER_01 28:57

If you use those subscriptions a lot, then it's worthwhile paying for them in your business, right? So, like for me, those those ones are really important.

SPEAKER_00 29:05

Yeah.

SPEAKER_01 29:05

However, I'm thinking along the the subscriptions that you've paid for that you haven't actually used for a long time, but you've forgotten they're even there, right? So it's probably good to check your bank statements and your your, you know, when you are doing your reconciling, just check to see if there's anything there that could be eroding your profit margins because you actually don't need them anymore. Like um, there's so many things, even like you know, Microsoft versus Google, you know, sh uh sheets and docs and stuff. You might be paying a Microsoft thing. You may need it, but or you may not need it, you know.

SPEAKER_00 29:41

And Adobe's another one.

SPEAKER_01 29:43

Adobe. Yeah, exactly. You know. Um and then they also put their subscriptions up as well, or you've got to go to that next level and stuff. So it's really important to keep those understanding.

SPEAKER_00 29:54

Well, they they all make it difficult to cancel them. Oh it's not impossible, but it's usually very difficult to find that little buttons. I know and it's hidden. Have you no you've got to go to Chunk GPT to ask it with how do I cancel this account? True. So you wish you had the paid version. So yeah, you should be looking at your all your expenses you should look at to see do I still need to pay for those things.

SPEAKER_01 30:16

So just we're coming sort of coming into the runway, I guess, sort of just about to land. Um, why do you think business owners don't like to check their their numbers? Or they're frightened of what they're going.

SPEAKER_00 30:28

They they don't understand them.

SPEAKER_01 30:30

Yeah.

SPEAKER_00 30:30

And they're frightened of the answer, or they may not be up to date, or they may be inaccurate. So all of those things I think I think it's more not understanding the numbers. Yeah. Um, it's more education.

SPEAKER_01 30:44

So I I have to say that it took me a long time to learn it. Um, it really did. There is a great book called Um, what was it called? Profit First? Yes. Okay. Rowan Crabtree, I think his name is. Um, but he talks a lot about how to to understand those numbers and he really does use layman's terms. But I remember, you know, when your account starts talking about debit and credits and balance sheets and PLs and all those words you're not used to hearing. And if you don't understand what you're looking at, it's really hard to go looking at it. You then go off your bank account, don't you? So I it's it's it's a normal response because you just don't know how to read it or look at it or to even understand it. And it does take it does take business owners a little while to get their heads around it.

SPEAKER_00 31:34

So that's why they should reach out. Reach out. Reach out.

SPEAKER_01 31:38

Yeah, or reach out to anybody, right, who understands it.

SPEAKER_00 31:40

Just a colleague can help.

SPEAKER_01 31:43

So busy is activity.

SPEAKER_00 31:46

Yeah.

SPEAKER_01 31:47

All right. Uh profit is outcome.

unknown 31:50

Yes.

SPEAKER_01 31:51

Revenue is vanity. Right. We've said that before. Yes.

SPEAKER_00 31:54

What was the next bit we forgot?

SPEAKER_01 31:56

Cash is reality. Cash is reality. It's a really good little saying. Yep. And I often catch myself saying, Whoa, I wonder how much sales they did. Or what about sales this month? But it's that is vanity because if you say, Oh, we do two million dollars worth of sales or whatever it is, it makes you feel good. Um, and yes, it's an indication that your business is doing good, but how much of that cash is reality that you're keeping as profit in the business? And that's probably the most important thing. Exactly.

SPEAKER_00 32:22

Any last words, Kay, on on um on this topic? Well, I think we've probably said it all. I think the main thing is reach out to anybody if you don't understand. Yeah, don't be shy, don't be embarrassed. Make sure you're not going to be able to do that. Keep them up to date. And um, above all, invoice people promptly.

SPEAKER_01 32:43

And check your margins. Yes. And no cashies.

SPEAKER_00 32:47

I hate you need to come up with a different word for that. Anyway. All right, we'll see you on the next one. Thanks for listening.