If you have read my blogs over the last couple of years, you will know that I hold a particular view of the “recession”; it was patchy, not universal. Its impact ranged from the catastrophic (if you were in house building, car manufacturing, or banking), to the liberating (with interest rates at an all time low, many households were between £100 and £150 a month better off). Public money was drying up, but private/personal money was plentiful.

Reliance on public funding has become an increasingly high risk strategy. I speak from personal experience as the ex-treasurer of an excellent provider of arts education which closed due to withdrawal of its core funding. Other organisations I know well are also starting to think the unthinkable – what if we can’t rely on public funding anymore?

So what is Plan B?

Well, I think public funding will become increasingly scarce, and with the hoops to jump through and numerous forms to complete, it will become harder to maintain.

There has been an interesting debate on LinkedIn to do with factoring as a way of improving cashflow. What caught my eye was a comment that said “payment terms has, and never will, kill a good idea”. I see this as a clarion call to every organisation that has a good idea – if it’s that good, someone will pay for it.

The balance sheet tells you what you own, how much you are owed, and how much you owe to other people. Broadly speaking, assets are those things you own, or are owed, and liabilities are those things that you owe to others.

Liabilities include things like overdrafts, loans, and debts to other people (creditors). But are all liabilities bad?

Borrowing money means you have cash to do something with. If it costs you 5% to borrow £10k, and you are able to generate a profit of 7.5% through the activities you can make happen, then you are making a profit of 2.5%. Without borrowing the money you would have made no profit at all. So a loan can be a good thing, as long as you are making good use of the opportunity.

Investments in your business are liabilities. They represent the amount you have been loaned and, as above, you need to be sure you are making the most of the cash. Even “non-profit” organisations need to demonstrate that they are fulfilling their “non-profit” objectives. Is the cash sitting in the bank, or being used properly?

Liabilities also include Trade Creditors – money owed to your suppliers. It is important that you pay them within agreed terms, but don’t pay early if you don’t need to. This enables you to do something with the money.

All business owners and managers should know how much they owe to other people. Not just so they know how much they owe, but so they know how much cash they are sitting on that belongs to others and to be thinking about what they are doing with it.

Since April 2009, under the Working Time Regulations 1998 (as amended), all employees have the right to 28 days, or 5.6 weeks, paid leave each year.

5.6 weeks holiday, divided by 46.4 weeks (52 weeks less 5.6 weeks holiday) equals 12.07%.

A member of staff who is full time, or part time with fixed hours, usually has their holiday pay included in their salary. Unless it is otherwise contracted, casual staff, or those with irregular hours, have their holiday pay added on to their pay. Sub contractors (those not paid through your payroll) are not normally entitled to holiday pay.

So the simplest way to calculate how much a member of staff who works irregular hours is entitled to receive in holiday pay is to multiply their earnings by 12.07%.

For example, if a casual worker has worked 100 hours, they will have accrued 12.07 hours holiday. If their hourly rate is £10, they would be entitled to £120.70 holiday pay.

It is vital that the holiday pay is separately identified on their pay slip, as it is illegal to include it with their basic wages.

So there it is, the easy way to calculate holiday pay for those staff who work irregular hours!

I appeared on BBC Radio Coventry and Warwickshire this morning, to give my views.

www.bbc.co.uk/iplayer/episode/p0062shx/Annie_Othen_28_01_2010/

I start to talk about an hour and 20 minuites into the programme…

The starting point is to work out how much it costs to “keep you alive” each month. This should include your rent or mortgage, your utility costs, average food bill, travel costs, a contribution to a small annual holiday, and a little contingency “just in case”. Let’s say, for example, that this amounts to £1,200.

You now multiply this cost by 12 to get your annual cost: £14,400.

Assuming an average working year of 220 days, you need to earn just over £65 every day to stand still. However, that’s after paying tax. So your gross earnings would need to be in the region of £80 per day.

So assuming an 8 hour day, it costs you £10 an hour to sit still.

It might not sound much, but every hour you don’t earn means you have to earn more in the other hours. Let’s say you only earn in 60% of the time. You need to charge about £135 a day, or £17 per hour.

So when you sit down to read or do something that you are not being paid for, ask yourself, is it worth £17 per hour?

Thankfully most things that go wrong can be corrected.

But are there things that can go wrong that you can’t correct?

What is it that tips a business over the edge and into administration, or bankruptcy?

Top of the list has to be cashflow. No cash means no business.

Also up there is an inadequate capacity to deliver.

Perhaps the most difficult to deal with is a lack of confidence. It’s intangible. It’s not always something you know about, or can do something about.

Confidence is one thing you can create without spending a lot of money. Being positive can have a huge positive difference on you, your business, and your customers.

It got me thinking. What was really at the heart of his problem?

The Credit Crunch refers to a bank’s unwillingness to lend money. Was he looking for a loan? If so, what for? To invest in greater capacity? To launch a new line of products or services? To help with poor cashflow?

If it was the last reason, I can understand the bank’s reluctance to lend, and crunch his credit.

Banks have not helped themselves in recent months, but their core purpose remains the same: to lend money to businesses. In return they expect a profit on their investment.

If you are having difficulties convincing your bank to lend money to you, maybe it’s because of something you need to do, or say.

If you need help talking to your bank, let me know. I might be able to help.

So what is the Balance Sheet? In a nutshell it tells you three things:

1. How much you owe to others
2. How much other owe you
3. How much cash you have

Now I may be simplistic, but I would say these three facts are the three most important things every business owner needs to know – all the time.

There is a lot of jargon in finance and accounts. I make it my business to explain everything in plain English.

The Balance Sheet is getting a lot of air time because it’s important. If you still don’t know what it’s about. Call me!

• Ask yourself every day: “Am I doing the things today that will ensure my business is here in 12 months time? “
• If you are not doing things that are about your business being here in 12 months time, why are you doing it?
• Understand the difference between cash and profit – you can make a loss and make money, and you can make a profit and lose money.
• Learn what the Balance Sheet is.
• Write down what your business is for in less than 20 words. Print it out, laminate it, and stick it above your desk.
• A bit of luck can go a long way.

These all seemed a bit obvious when I was preparing the talk, but after the presentation the audience reminded me how easy it is to forget the basics.

The good:

Personal allowance UP! Every man, woman and child can now earn £6,475 (£6,035) before paying income tax. For those aged 65-74, it’s £9,490 (£9,030), and for over-75s, £9,640 (£9,180).

Basic rate tax threshold UP. You now pay 20% tax on the first £37,400 (£34,800) over the personal allowance, meaning under 65s hit the higher 40% rate at £43,875 (£40,835).

National insurance start point UP. You now need to earn £110 per week (£105), before paying for NI, usually 11%.

State pension UP. It’s £95.25 (£90.70) a week for a single person.

Pension credit UP. The minimum guaranteed income’s now £130 for single pensioners (£124.05), and £198.45 for couples (£189.35).

New Health in Pregnancy Grant. All pregnant women will get a non-means-tested £190 in their 25th week.

Inheritance tax threshold UP. You can leave £325,000 (£312,000) tax-free.

And the not so good:

Fiscal drag. This isn’t Alistair Darling in women’s clothes, it’s when increased allowances aren’t as generous as they seem. If wages and/or inflation increase by more than the allowances, effectively the government gets more tax revenue anyway, and the real value of the increase is less.

National insurance upper earnings UP.  You will pay 11% NI on earnings up to £43,888 a year (£40,040) and 1% above that.

ISA limits. No change. Yet again, the amount savable tax-free hasn’t increased with inflation or earnings.

Child Tax Credit family element. No change. Many families get this, and the freeze at £545 is an effective cut. Yet the means-tested element has increased to £2,235.

Remember to take proper advice before making any decisions…

www.moneysavingexpert.com is a great source of advice and help to those seeking to save money.