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Is cash flow one of your biggest issues? Do you have sleepless nights worrying whether you have enough funds to pay suppliers? To make payroll? This weeks podcast guest has a powerful tool  that will help you. Colin Hewitt founded Float, the cash flow forecasting app. He lives in Edinburgh, Scotland but was originally from Belfast, Northern Ireland.

Why was Float created?

Colin Hewitt was caught up in the excitement of the web. He started an agency doing digital work like building sites and eventually his focus turned to finances. It’s something you must be very aware of. Making a payroll becomes front and centre.

Float - Cashflow forecasting made easy with Colin Hewitt.

Float – Cashflow forecasting made easy with Colin Hewitt.

He didn’t want to be so worried about finances so he decided he needed a better solution. A more automated solution. Initially it was via a spreadsheet. He started using cloud accounting. He realised he could extract data from the accounting software and via an API direct the data into his spreadsheets.

Then he attended a conference in the States, along with people like Mark Zuckerberg and other exciting entrepreneurs. This prompted him to get out of agency work and into product work.

How does a design guy come to build a financial app?

He was always operating at the intersection between design and technology. He was non-financial. After university, he needed to get out of student overdraft and student loans. He built a personal spreadsheet to get himself out of debt. He built a spreadsheet. It told him that if he spent £100 less than he earned in 12 months he’d clear his overdraft. He graphed it and this visualisation made all the difference to him.

He took this graph idea into his business.

Kevin’s experience from the business health check suggest 9 out of 10 businesses worry about cash.

His system works like IFTTT, IF THIS THEN THAT. You authorise your accounting platform to allow float to access your data. Once you have given permission, Float have a token which allows Float to request data from the software, like:

  • Bank transactions
  • Open Invoices
  • Journals

Float builds a set of accounts back into a cash basis. This provides the user a really nice cash based forecast.

There is no need to re-key data into a spreadsheet. As soon as you leave the spreadsheet, a new invoice coming in changes it immediately.

Colin recommends Receipt Bank or Shoeboxed to capture receipts in a timely way so the accounting system is up to date. He then transfers this data from the accounting system (Xero, Quickbooks online, or Free Agent) into Float using the automated API.

Float has a big development programme

Colin has worked on the Float solution for 5 or 6 years. It is very nuanced. It is not likely to be subsumed by the accountancy solution provider like Xero.

Cash flow forecasting is a more niche, targeted area. Float is just focused on developing more and more features and application uses for Float users.

He is going deeper into understanding what customers want. Customers are busy, so the product must be easy for people to pick up quickly and use.

For more complex modelling and sophisticated forecasts, patterns, growth trajectory, he’s still in the foothills. A lot of leg-work is still required for these issues.

40-50% of his clients are professional services. The pipeline looks rosy for 4-5 months then after then the forecast falls off a cliff. So, the focus turns to chasing monies you are owed.

Xero has just hit 1,000,000 customers. When they started with Xero, they had 20,000 customers. It still feels like the market is very early. Plus, it is an international business.

Xero is a New Zealand business. There has been a lot of innovation from the southern hemisphere. Most companies are using cloud software, whereas businesses in US are still turning cheques.

Why does Float help a small business?

There is appoint in any small business where you can keep a handle on finances. A few invoices, a glance at the bank account. You can see that on your phone. Two invoices, pay two bills.

Then your business reaches a point where, you have a balance of £xk and you have outstanding invoices to pay of £yk and a vat bill to pay, then you need to scribble the numbers down.

Most people use a spreadsheet from that moment.

Once the complexity starts to grow you start worrying if your spreadsheet is up-to-date. You realise that you have a budget, so will that new payment take you over budget etc. You start needing to go in and write in all your actuals.

Spreadsheets are great for a stationary position. They don’t live so well with movement. Float keeps everything current.

Float helps you understand options. Invoices due and bills to pay. You can set an expected payment date, put that into the Float and see if it makes an impact. You can model carefully when you can make payments. It gives you control.

You can decide payment and investments more effectively.

When you scale your business, it will swallow cash.

Expansion means paying out before you get money in: e.g.

  • Recruit a salesman
  • A marketing campaign
  • A new piece of plant, equipment, buy before you can earn from it.

Float is not for everybody. Some businesses are not at the point they will have the discipline to enter the information and review the information it is telling them daily/weekly etc. Float does seem to work better for larger companies. But also, it makes sense for growing small businesses.

Making Tax Digital – will drive people to purchase a cloud based solution – Xero, FreeAgent or QuickBooks.

Kevin made the point that the inflection point for small businesses is all about moving from effort to key in numbers versus time spent interpreting what those numbers are saying about your business.

A lot of accountancy practices are moving towards Xero and Float. The advisory side of their firms really adds value. Float themselves are moving closer to budgeting.

Lots of applications can be plugged into Xero. What used to cost thousands now costs a fraction.

Design question – Float pricing format

Float costs more than Xero. They were repositioning their services relative to Xero. Arguably they are under-priced to achieve scale, especially with Intuit offering low prices.

Pricing is a huge thing for them. Why the largest fee on the left and lowest fee on the right. Positioning to make the value status and it reframes the thinking

Forecasting with spreadsheets can be a pain

Float is more than a spreadsheet. You have a base layer forecasts. Like Acetates for an OHP. Then you just change a variable at a time. Float highlights what changes thereby occur in multiple scenarios.

Unlimited scenarios? Not really, they have a large limit, but they are unlikely to be used.

Can your brain juggle between 5 or 6 scenarios on top of the 3 typical accounting forecasting cases:

  • Base case
  • Preferred case
  • Optimistic case

Float is not restricted too much because they want to find where the real value is for people. Smaller companies often get more value out of certain features. Scenarios is a price multiplier for them.

CEOs and finance people buy Float

As businesses grow their use of Float changes. However, it will not necessarily widen the users at each customer. The CEO wants to see one or two things. The graph, when they will run out of money, accounts receivable, and generally it’s the runway.

Kevin is running a course for Management Accountants: Bean Counter to Business Adviser

Float is all about managing cash as opposed to it managing you. Other accountancy solutions are often built by accountants. This plays into a design focused approach – what does a business man want to see. And then how to make it so easy to do.

If you want to know more:

Live chat in UK hours.

It is worth the investment because it will give you a deeper understanding of your business? Can you get this done in 100 days? Yes, depending on the help you need. You can change very quickly. Don’t have to wait for a new financial year either.

Use Shoeboxed or Receipt Bank bookkeeping solution to get your receipts into the Xero software.

The Next 100 Days Podcast is brought to you by Graham Arrowsmith and Kevin Appleby