Blue - from the success of “All Rise”, to “Guilty”…of not paying their bills
Whilst walking through town recently, a poster advertising that Blue would be performing at a local pub caught my eye. Although they were a “band” I liked back in the day, this was not what interested me, it was more why they were performing in such a small venue. Did they really need the money that badly?
In one of those bizarre coincidences I was listening to the radio a few days later to find the topic of conversation being that Lee Ryan had been the final member of the band to declare himself bankrupt, a quick search also showed that the band’s company had also been placed in to administration. With these individuals earning more money than most of us ever will, how do they end up in situations like this? The answer usually comes down to the fact that the individuals simply can't pay tax bills and have not had to think about cash flow and how they should manage their money going in and out.
Ensure you have funds in the future to pay the debts you accrue now
The key to cash flow management, is fairly simple, ensure that you have enough money in the future to pay for the debts you accrue now. This works from an individual basis up to a large company. If you can believe the quotes in the press, one of the Blue members was earning £250k a month at their peak, but spent the lot. As is the case with other individuals and companies alike, it is very easy to spend the money when it is there. Whether that be buying the newest and fastest car, or buying new machinery. What many people fail to take into account, is from that profit or earnings, tax will need to be paid at a later date. Whilst times are good, this can be paid, when the tax bill comes in, you simply spend a bit less in the month and make the payment. However, what happens when times are no longer good?
It has been reported that the average person has sufficient funds put to one side to afford to pay the essentials for less than six weeks. It is clear that most individuals are not managing their cash flow at a personal level. For the super wealthy most would think they are in a much better position, but their bills are usually a lot higher, especially when the tax man wants to be paid. Kerry Katona, is another example of celebrity that can’t pay tax bills, being made bankrupt more than once.
You need a cash flow plan
So, what can we all learn from this? Most people reading this will never have a client with a top 10 single or appear on an Iceland advert! However, the principals are the same, ensure that you have a proper cash flow plan, so that debts that accrue today can be paid in the future, even if the income drops. For some it will be a case of actually putting the money to one side so that it is specifically set aside for the future debt. Never assume that what you have earned in the past will always be earned in the future, have some reserves to one side in case that rainy day arrives, and most importantly, if things do go wrong and you begin to notice cash flow problems, seek professional advice as early as possible. One love.....
Download our guidance paper on how to deal with a cashflow emergency.