You have a successful business, but you're constantly short of cash in the bank. What's gone wrong? Well the answer may be that you've failed to manage your drawings.
Many business owners have no idea how much they draw from their business. They use their business account to pay their household bills and credit cards. And they draw cash whenever it's needed, which is usually every week. They never find out how much it all comes to until they see their annual accounts, which don't look very nice. How can one take control of one's drawings?
Well the answer is very simple.
First, you have to set up a separate account for your oersonal expenses. This may involve paying bank charges on your business account, but it's worth it.
Next, set up a standing order from your business account to your private account. The amount is not what you spend privately on average, but what you can afford out of your business.
Now you have a fixed sum to spend each month. Don't draw extra amounts when you are short of cash. Instead, you have to learn to budget.
How much spending is essential? What limit should you place on your shopping? How much is my holiday going to cost me? All of these questions arise the moment you limit your monthly drawings.
In short, a fixed monthly sum for drawings focuses the mind. It's as if you were an employee. The key is to make the budget tangible by transferring money into another account.
A golden rule in accounts is that Drawings must never exceed Net Profit. Banks take a dim view of one's credit worthiness if they do.
So get your accounts in shape by managing your drawings.
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Tuesday, June 25, 2013
Thursday, June 6, 2013
When will the Great Recession End?
Francois Hollonde, French PM, said '|We're over the worst' this time last year.
Looking back at the Great Depression of the 1930's, one would expect the worst to be over by 2014. Whilst mistakes were made in tackling the Depression, and there were earlier attempts to jump start the US economy, it wasn't until 1934, 5 years from the Wall Street Crash, that GDP began a sustained climb upwards.
However, economic commentators identify the abolition of the Gold Standard, which prevented governments from inflating the money supply by printing money, as the key event that allowed governments to start vast capital projects.
Just as in the 1930's, everyone started off with trying to balance their budgets (governments rarely succeed in doing this!). But as grow stalls, more are convinced that something needs to be done to stimulate growth, and this requires abandoning austerity policies.
The answer is to print more money. This not only provides money for capital projects, it lower the price of the nations currency, which is just what you need to discourage imports and encourage exports. Inflation is a problem, but in a depression, orices are usually falling, so a dose of inflation doesn't have too much of a long term effect. And of course inflation gradually erodes all those huge debts that piled up during the crash.
World leaders won't tell you this of course. Mysteriously, they manage to have massive funds for capital spending, whilst targeting a reduction in the budget deficit. I say targeting, because no government has met it's targets for 2012, projections are always too optimistic.
So will it be onwards and upwards after 2014? Well, there was a temporary dip in 1937, but as WW2 loomed, governments went all out on preparing for war. This lead to a boom in the GDP and the return of full employment.
Today, the situation in Syria has the potential to start a World War. No wonder Obama is so reluctant to commit himself to helping the Syrian Rebels. It's as if a game of chess is being played out in the Middle East, rebel pawns attacking Syrian bishops, backed up by Hezbollah rooks and Iranian knights. All capable of taking out the Israeli knight, with the Russian queen threatening to intervene in the distance. Trying to avoid the conflict are the Turkish pawn, French bishops and the US queen.
So expect a period of recovery as economic policies change, but be ready for the bumps in the road!
RELATED ITEMS
Contact Details for Acorns Accounting
Looking back at the Great Depression of the 1930's, one would expect the worst to be over by 2014. Whilst mistakes were made in tackling the Depression, and there were earlier attempts to jump start the US economy, it wasn't until 1934, 5 years from the Wall Street Crash, that GDP began a sustained climb upwards.
However, economic commentators identify the abolition of the Gold Standard, which prevented governments from inflating the money supply by printing money, as the key event that allowed governments to start vast capital projects.
Just as in the 1930's, everyone started off with trying to balance their budgets (governments rarely succeed in doing this!). But as grow stalls, more are convinced that something needs to be done to stimulate growth, and this requires abandoning austerity policies.
The answer is to print more money. This not only provides money for capital projects, it lower the price of the nations currency, which is just what you need to discourage imports and encourage exports. Inflation is a problem, but in a depression, orices are usually falling, so a dose of inflation doesn't have too much of a long term effect. And of course inflation gradually erodes all those huge debts that piled up during the crash.
World leaders won't tell you this of course. Mysteriously, they manage to have massive funds for capital spending, whilst targeting a reduction in the budget deficit. I say targeting, because no government has met it's targets for 2012, projections are always too optimistic.
So will it be onwards and upwards after 2014? Well, there was a temporary dip in 1937, but as WW2 loomed, governments went all out on preparing for war. This lead to a boom in the GDP and the return of full employment.
Today, the situation in Syria has the potential to start a World War. No wonder Obama is so reluctant to commit himself to helping the Syrian Rebels. It's as if a game of chess is being played out in the Middle East, rebel pawns attacking Syrian bishops, backed up by Hezbollah rooks and Iranian knights. All capable of taking out the Israeli knight, with the Russian queen threatening to intervene in the distance. Trying to avoid the conflict are the Turkish pawn, French bishops and the US queen.
So expect a period of recovery as economic policies change, but be ready for the bumps in the road!
RELATED ITEMS
Contact Details for Acorns Accounting
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