A surplus at Her Majesty’s treasury! I don’t believe it

A surplus is only a windfall when we understand our cash flow well enough to interpret it.

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The chancellor says he has a surplus of 2bn pounds this month, see https://www.bbc.co.uk/news/business-45256075. Apparently this will assist him making his budgetary plans and also when he carries that little red briefcase into the House of Commons. 2Bn is a lot of money, however when compared to the countries annual income of around 750 Billion it is not a huge amount.


A crucial factor here is what was budgeted to be spent. An extra 2bn, 2m or 2 thousand is a lot if your gross income is made up of a large percentage of that number. In simple terms the message from the government today is that our cashflow was incorrect, we actually have more than we expected. At the macroeconomic level this is scary numbers and enormous amounts, but this kind of upturn in fortunes or whatever you wish to call it is so valuable to the beneficiaries.


A business with a cashflow projection of £20,000 in August that suddenly receives £30,000 has a gross surplus of 33% of that months’ income. As long as this is not early payment or debt recovery it can be considered a bonus. A cost of sale and logistics must be factored in, but it is a benefit to the business and the owner.


The key here is knowing about that surplus or extra income. We can see from HMT that they monitor this closely hence the reporting. Its good news. Every business should monitor their cashflows and be able to review this information on a daily or weekly basis. In the book Profit First the author describes how putting income into different bank accounts allows the business to retain profits better. To do that you have to have the income, but it is correct and the basic fundamental of calculating where you are and what financial health you are in as a business.


For many years this has been the privilege of businesses who can afford a good accountant or can resource a finance function. The SME was left out in the cold. Their cashflow needs were either when they started a business, needed lending or were in trouble.


That issue is eased now by new ways of banking and running our businesses. Cashflow starts at the bank, so why would a banking app not deliver cashflow as part of its functionality? Not a guess, a facsimile of previous months, but an accurate projection from aggregated data to show the SME the financial health of their business. The sales ledger, purchase ledger, regular payments, projected payments, income all in one place. The view of today, yesterday and tomorrow.


In the coming months products will appear that do this, not past views, not guesses on what happened previously, but credible financial information presented via a banking app.


Food for thought I think, If its good enough for HMT, it must be good enough for our SME population. The trick is making it available to them without either high cost or adding tasks to an already busy day.

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