Entrepreneurs are known to be both financial extravagant and spendthrift in equal measure depending upon circumstances. They are keen to watch outgoings wherever possible, but will splash around money when it comes to advertising and marketing.
If you’re as adventurous as some entrepreneurs though, sometimes it’s possible to find yourself in a cash flow short fall situation. When this happens it’s likely you’ll turn first to your expenditure to see what can be cut back on without jeopardising your future earnings.
When I work with businesses who can sometimes be affected by cash flow, I share with them some tips on how to manage their cash flow, assess their expenses and audit bills.
The following are some basic principles and often the first port of call when it comes to helping get through the short falls without damaging your future financial success.
Scrutinise your financial statements and bookkeeping reports.
You’re looking for places where money is unnecessarily tied up – like in over due Debtors, non-interest earning bank accounts and slush funds. You want to call in all your outstanding monies and make sure that there isn’t any cash that’s lying around doing nothing when it should be working hard at earning your interest or more money.
Dispose of Unused Assets
Do you have any assets, such as plant and equipment in your business that are idle and need to either be put to service or disposed of? These types of assets take up expensive real estate and hold book value in your business; they’re a way that money can be squirreled away in your business and if not monitored, a way that allows funds to leak out of your business. Particularly in insurance, maintenance costs and overheads.
Exploit Intellectual Property
Are you holding Patents or Trademarks that haven’t been exploited yet? These are another type of asset that can be left forgotten and never leveraged. Keeping on top of your Patents and Trademarks so that you know when you can start to take advantage of them is vital. They’re not just for show in your financial reports, these are assets that need to be working for you.
Are Your Investments Working For You?
Run a quick calculation over your investments to make sure that they’re working as hard as they could be. Sometimes, a business investment gets set up and then is left to do its thing on autopilot, but while you’re busy attending to other things, the economy and situation has changed. Leaving you with an investment strategy that hasn’t kept up with the rate of economic change. Check over all your investments to make sure you’ve got the best possible terms, rates and products available. You want every cent to be working at maximum potential.
Reconcile Your Accounts Payables
Check that you’ve got correctly reconciled accounts for your accounts payable and each supplier. Get your accountant, bookkeeper or accounts clerk to wind up negotiations on disputed transactions in your favour and have these written off your books.
Negotiate Lower Costs
Ask your accountant, bookkeeper or accounts clerk to give you the last few invoices from one of your newer suppliers and see if there’s anything new you’ve been purchasing or something you’re buying in volume that you can negotiate a lower price on. Get the supplier on the phone, have a meeting and negotiate lower prices, better payment terms and preferred customer status for your account with them. If it sounds like they’re agreeable, then find out if they’ll enact the negotiated changes retrospectively to reduce your current outstanding invoices with them too.
Arrange Payment Plans
Call and talk to your most important suppliers, the ones that if you were unable to do business with them you’d go out of business yourself, and arrange a payment plan for any outstanding accounts that are challenging to pay in full right now. Ask them to work with you while you get over this short term financial hiccup and find out if they can give you any advice on how the products or services they supply to you might be further leveraged in your business. Your suppliers, if they’re good at what they do, will have lots of ideas and options available to make it as easy as possible for you to continue doing business with them.
Get Rid of Old Stock
Make it a priority to sell or dispose of any old stockpiles you have in your business. Old stock and unsold products tie up warehouse space and cash. Get your sales people to give you suggestions and ideas on how to move this stock as quickly and profitably as possible. Then select the strategy that gets you free from this old product with the least possible negative impact on your bottom line.
Get someone to go through all your accounts related to disposal and waste management. Then have them go through your business and processes to find ways to reduce the amount of waste your business generates. Implement waste reduction strategies, so that you are spending less on disposal and removal as well as initial purchasing volumes.
Have someone investigate opportunities to create savings by consolidating bills for things like energy, telecommunications and transportation/shipping. Challenge your service suppliers to provide you with the best financial incentives to win your business and move all your accounts to them.
Incentivise Non-Sales Staff for New Business
Incentivise your non-sales employees with rewards for bringing in new business for you. Set up some guidelines and rules about the conditions under which they would be rewarded for bringing in a paying client or buying customer. Please note this isn’t about cutting prices and doing special deals for family and friends. This is about giving the non-sales people in your team the opportunity to sell for you and them getting something for the efforts.
It’s important to get your business through the lean times as quickly as possible so that you can put more robust systems in place to ensure that you don’t have to suffer them too often.
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I know, working with a business coach or getting some business coaching while you’re going through some difficulties may seem like it’s too late. And often when things are going well it may seem somewhat unnecessary because, after all, business is going well.
The truth is there is never a better time to get a business coach if you want to grow. With the perspective and insight that a trained and experienced business coach brings, you’ll get the objective insights of a systemised approach to coaching.
In business it’s the decisions and actions you take that determine how much and how quickly you achieve massive success.
If you find yourself struggling for more than a month with cash flow problems then it really is time to do something different.