Who can act as a company director

Every company must have at least two directors. But who can act as one? The answer is almost anyone. There is no formal requirements to becoming a company director unless the articles of association of the company say different.

The following can NOT become directors

  • A body corporate (another company)
  • An undischarged bankrupt
  • The auditors of the company
  • Anyone disqualified by the courts from acting as a director
  • Its worth pointing out that directors have a lot of responsibilities and directors should always make themselves aware of them before signing.

    Small business budgeting

    Every month large  organisations pour over budgets, Analysiing variances, updating forcasts.. But what about Small Businesses? Should they budget too? Absolutely. If you don’t prepare a budget you have nothing to aim to. Budgeting will assist with business planning and cost control ultimately success.

    What Is a Budget?Although you might not know it, you prepare a budget each time you estimate how much cash you will have left at the end of the month after paying your bills.

    A budget is a forecast of all cash sources and cash expenditures. It is organized in the same format as a financial statement, and most commonly covers a 12-month period. At the end of the year, the anticipated income and expenses developed in the budget are compared to the actual performance of the business as recorded in the financial statement.

    The budgeting process takes a number of steps the first I would suggest is profit and loss forecast. This involves taking last years monthly profit and loss statements and teasing out budgeted figures for the following  month/ year in a spreadsheet. For example if your sales in February 2010 were €70K but you know you have a new sales person and better products this year you should be budgeting for €100K

    If your phone bill was €1k last March and you’ve changed providers and negotiated a discount you can lower this amount. Its extremely important to be realistic with these figures. Otherwise the whole budgeting process is a waste of time.

    Once you have extrapolated out the monthly profit and loss figures you now have the basis of your budget. Remember your budgeting is an ongoing process. Theres no point in preparing a budget and sticking it in a drawer for the year. You need to constantly measure your results against your predicted budget figures and catch small problems before they become an issue.

    Here are our tips to making budgeting work for your small business

     

    1. Update the budget every month and analyse your variances. If you have your budget set up correctly in a spreadsheet this should be a simple case of plugging in figures.
    2. Set up a very simple system for your budget. If it takes too much time, you wont do it. `
    3. Build up a cash reserve. Budgeting should help you control costs and cash flow. In uncertain economic times  a cash reserve will help you sleep at night
    4. Be Conservative. Expecting a 40% sales increase in one month for no apparent reason is not going to end well. If your constantly missing your targets you will become deflated.
    5. Be Flexible. If one of your figures is way out for example you purchased new equiptment which wasn’t planned, you may find production has increased to matcth this.
    6. Accept that budgeting is a form of estimation and by that nature it will never be perfect.
    7. Don’t scrimp too much on critical expenditure which drives sales, For example marketing or sales person commission.

    Calculating break-even point

    Firstly lets look at the terms used in this post:

    The Break-Even point in sales volume is defined as:

     That point in sales volume, or revenue, where direct costs have been recovered, fixed overhead expenses have been absorbed and where profit begins”

    Contribution is the SALES less VARIABLE COSTS

    Contribution is so called as it literally does contribute towards fixed costs and profit, As sales revenue grow from zero, the contribution also grows until it just covers the fixed costs. This is the break-even point where neither profits or losses are made.

    It follows that to break-even the contribution must exactly equal the amount of fixed costs. If we know how much the contribution is for each unit sold, then we can calculate the amount of units required to break even as follows.

    Break even point in units = fixed costs / contribution per unit

    For example if an organisation manufactures a single product, incurring variable costs of €50 per unit and fixed costs of €10,000 per month. Of the product sells for €100 per unit then the break even point can be calculated as follows.

    = 10,000 / 50
    so the break even point is 200 units

    Using Break-Even in Modeling:

    The Break-Even formula can be used as a model to estimate the effect of major decisions on the financial status of the business such as adding a new location, making a capital investment, dropping or adding a product line. Simply estimate the changes in fixed and variable costs (and sales) that result from the decision and plug them into the Break-Even formula for your company. This can also help you set goals for the new operation.

    In fact, ANY significant contemplated change in your cost structure resulting from a proposed decision can be modeled to determine the effect on the company’s financial results before the decision is made. You will know what you face and are required to overcome ahead of time. You will be able to set goals based on financial facts rather than intuition only.

    Break even point can be shown graphically at at the point where the total revenue and total cost curves meet.

    Limitations of Break Even Analysis:

     

    It is best suited to the analysis of one product at a time. It may be difficult to classify a cost as all variable or all fixed; and there may be a tendency to continue to use a break even analysis after the cost and income functions have changed.

     

    Call answering service

    I’ve been researching call answering services (virtual receptionist) for a few weeks now, My problem is relatively simple. 80% of the time either myself or one of our staff members is available to answer the phone. But at times like Christmas and Holidays I may require some extra support.

    The only professional pay as you go service I could find was Answer.co.uk
    The set up was very easy, The costs are low (£1 per call) and the quality of the receptionists is excellent. Highly recommended.