The True Power of Free Cash in Your Business

Does this sound familiar? You’re running a growing business in Farnham, Farnborough, or the surrounding Hampshire areas, and you’re thinking: “Our sales are up, the accountant says we’re profitable… so why isn’t there more money in the bank?“

If you’re nodding your head, you’re not alone.

As a business coach working with entrepreneurs across Surrey and Hampshire, this is one of the most common frustrations I hear from my clients.

At the recent National Entrepreneurs Convention in September 2024, there was a fascinating discussion about what truly measures business progress. While there are many metrics we could focus on, today I want to share something game-changing with you: the concept of ‘Free Cash’.

What Exactly is Free Cash?

Let me break this down simply: Free Cash is what’s left after everything – and I mean everything – is paid for. It’s the money that’s genuinely yours to keep or reinvest.

Here’s the thing I often explain to my coaching clients in Farnborough and the surrounding areas – revenue and profit look great on paper, but you can’t fund your business dreams with numbers on a spreadsheet. Only real, available cash can do that.

The ‘Not Free Cash’ Trap

Many business owners I work with, particularly around the Farnham and Farnborough areas, fall into a dangerous trap.

They see money in their account and think it’s available to spend.

But often, that money is what I call ‘Not Free Cash’ – it’s already spoken for:

• VAT payments waiting to go to HMRC
• Staff wages for the month ahead
• Supplier invoices coming due
• Corporation tax building up
• Customer deposits you’re holding

Using this money as if it’s free to spend is like playing Russian roulette with your business finances. I’ve seen too many local companies get into hot water this way.

A Practical System That Works

Let me share a system I recommend to my clients – one that’s proven incredibly effective. It’s a monthly ritual that you can implement right away:

1. The VAT Sweep
   Calculate your typical VAT percentage of revenue (for example, 13.1% – though your number will likely be different). On the last working day of each month, move that percentage into a dedicated ‘VAT Account’.
2. The Tax Protection
   Move about 18% of your monthly net profit into a ‘Corporation Tax Account’. This ensures you’re never caught short when the tax bill arrives.
3. The Operating Float
   Keep a sensible operating balance in your main account. The amount depends on your business size – for some of my smaller clients in Farnborough it might be £10,000, for larger ones it could be £50,000 or more.
4. The Profit Account
   Everything left over goes into what I call your ‘Profit Account’. This is your actual Free Cash – the money you can genuinely use to grow your business or reward yourself.

Why This Matters So Much

As a business coach based near Farnborough, Hampshire, I’ve seen this system transform businesses and, more importantly, business owners’ lives.

The peace of mind it brings is incredible:

• No more sleepless nights wondering if you can meet payroll
• Clear visibility of what you can actually spend or invest
• Confidence in making business decisions
• Stress-free tax and VAT deadlines

Taking Action

If you’re running a business in Farnborough or anywhere in the surrounding areas, I strongly encourage you to implement this system.

Start with understanding your numbers, then set up those separate accounts. It might seem like extra work initially, but I promise you – the clarity and confidence it brings are worth every minute spent setting it up.

The beauty of this approach is its simplicity. You don’t need complex software or an accounting degree. Just a clear understanding of your numbers and the discipline to stick to the system.

For those who couldn’t make it to the Convention, I wanted to make sure you didn’t miss this crucial insight. It’s one of those business fundamentals that, when implemented correctly, can truly transform how you run your company.

Ready to get better control of your business cash flow? Let’s talk about how we can implement this system in your business. As your local EC coach in the Farnborough area, I’m here to help you make these principles work in your specific situation.

Remember: Real business freedom comes not just from making money, but from knowing exactly where it is and what you can safely spend. That’s the power of Free Cash.

Best wishes,
Jamie