Five key areas to control your cash ...
When businesses enter a phase of growth they often find that cash doesn’t keep up and are at a loss as to why. Key reasons for this can be:
1 Debtor control
As sales increase the business is suddenly dealing with a lot more customers and this is when it can be easy to lose control of keeping on top of the cash coming in.
Having clear terms and conditions for your customers over when payments are due and what the business does if payments are late is essential but this is only part of it – saying that payments are due in 14 days is all well and good, but if you don’t have procedures in place for chasing these and ensuring that they are paid on time then customers will soon realise and some will extend the time that they take to pay you.
Having a policy in place and sticking to it is key, be willing to follow it through and take legal action to recover debts if needed – a customer is no good if they don’t pay you!
2 Stock control
If you operate a stock based business then as you grow you will need more stock in order to fulfil the orders, however, the temptation is there to order too much stock – just because business has doubled doesn’t mean that you need double the stock.
Regular reviews of the stock held and the time it is held for are recommended .. having enough stock for 6 months worth of sales isn’t really necessary if you can get it delivered to you in 48 hours!
3 Cost control
Business is good, suddenly the “short arms, deep pockets” mentality you have had to buying things for the business has gone out the window .. shiny things are suddenly grabbing your attention!
Basically … STOP! Do you NEED it, does it benefit the business? Yes, that all singing, all dancing top of the range laptop might be nice to have, but do you have the cash to splash and does it add value to the business?
Focus on spending the cash where it is actually needed and where you will get a return.
When a small business grows rapidly there aren’t enough hours in the day, you need help and you need it fast. There is the temptation to take on staff and fast, but is this the right step? Are they the right people? Look at what you do, what do you NEED to do, what can only you do? What is it that you do but hate doing? This will give you a list of tasks that you can look to pass to others.
Then you can assess if you need an employee and how long for, you have a job spec for them too. You might look at that list and see it splits into several distinct areas and what you actually need is to outsource some of these to those more qualified to do the work – a virtual assistance for a couple of hours a month to do the admin, a social media manager who can look after your business Facebook and business Instagram for you, a bookkeeper to sort your receipts etc.
5 Financial information
Do you have up to date financial information at your finger tips? Now is the time to look at putting systems in place so that you can review the business performance on a monthly or quarterly basis. This then allows you to make meaningful decisions based on the performance of your business on a more timely basis – you move from being reactive to proactive.
Later this week we will launch our "Business Habit Tracker" and this may help you to keep on track .. keep an eye on our social media for this going live!
When the cash is evaporating stop and look at these five areas to see where it is going and take the steps to get the control back. If you would like to talk to us to see how we can help you with this then get in touch.