Making your money work for you

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More than a few people are what I call "trading on the edge".

I am not going to name anyone, instead I am going to try and give you a little advice that might help you.

Cash flow is king when it comes to making a living, for a good cash flow, forward planning has to be essential.

Let me explain, at all times i keep a "float" of £xxxx in my paypal account, and NO TIME ever do I dip into that amount for any reason other than refunds or fees.

Its obvious to me what some of you are doing, selling the goods then taking the money out and spending it.

This is bad business practice, and will lead to much trouble at a later date.

Instead of doing this, as a suggestion do this instead

Set yourself a float level, lets assume your average monthly ebay fees are £300, then that would be a good float level to aim for

Now when you sell something, only withdraw 90% of the amount to your bank account, and leave the 10% to build up until you reach your "float" level.

It might take a couple of months, and the temptation to take the money out might be very high, but doing it slowly over a period of time will allow you the security of knowing if need to you have a "safety" net there.

With ebay, you just cannot survive selling "hand to mouth" In other words hoping the next sale will pay the bills or sort out the money for the refunds, or chargeback or whatever.

The other bit of advice i would give is this, i dont take out 90% of the sale price, I take out this amount, my cost price + vat + 15%.

I am not going to tell what the figures are, but lets say the above comes to 70% of the sale price, well out of the remaining 30% it gets divided up into 10% for the "float" 20% to be re-invested in stock purchasing.

The vat component and the 15% i remove are dispersed like this
The vat goes into a high interest account, and I pay my vat bill every 3 months out of that, but all the time the money is in the account I am earning interest on it.

And as i am adding to it each week when I do my accounts, it builds up slowly but there is always enough their to pay my bvat bills, which are anywhere between £1500-£5000 per qtr.

Putting the money away like this each week means the vat bill isnt that painful, and even after tax on average I get £100-£300 per year in interest.

Out of the 15% well the same thing happens with my income tax payments and all the bills I need to pay.

Again doing this slowly each week, allows interest to accrue over the financial year.

Now, when I talk about the sale amount, I mean the amount the item sold for and NOT the postage charged.

But again with the postage charge, that gets withdawn and put into an account which earns interest, so when the bills come in, the money is already there, and its earning interest.

as both vat amount and the postage amount i charge are always less than I pay out, at the end of each year their is quite a healthy surplus, which is then used to purchase stock for the coming 12 months.

Todays sosciety is rapidly becoming what I call the "macdonalds" society, where everyone wants it now, pre packaged, sanitised and ready to eat, a society where everyone wants it done now.

Well by taking the above steps, and the figures arent that that much, lets assume a £30 sale, well taking £27 out instead of £30 isnt going to kill you, and given enough time, you would be surprised how quickly you can find yourself with a cash surplus.

Sorry if this seems patronising to some, but for some of you, a little bit of planning will make your business go a lot better than it already is.










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