I don’t think I have ever met a business person who wouldn’t agree with this headline, so why are most businesses not taking full advantage of cash flow improvements. We have all experienced difficult cash-flow periods within our business careers i am sure, and when you actually analyse what the cause is, most of it is highly predictable and can be resolved with careful planning.
I have written a number of articles around cash-flow as it is one, if not THE biggest killer of a business, and one of the major concerns for business owners. Businesses can be much closer to achieving success and growth with just a small few changes to how they view cash-flow and implement those changes simply and effectively.
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“I wonder how many of us at this moment in time have concerns around cash-flow, or indeed can foresee a difficult period in the near future?”
The common misunderstanding is that cash-flow issues are mainly a problem for smaller businesses, but in reality cash-flow effects the smallest to the largest of businesses. The size of the numbers is relative to the size of the business and the methods of how to improve cash-flow are identical.
“Cash-flow difficulties are also a huge distraction for the business owner, and takes the focus away from growth. It can actually take the focus and enjoyment away from running a business.“
We are not plumbers, electricians, insurance experts or marketing consultants, we are business people, and our career is about learning how to run a business and give us the income, lifestyle and freedom we dreamed about the very first day we opened the doors on our businesses. Cash-flow management is an essential part of this, and one of the fundamentally most important parts of our business activity. A degree in managing cash-flow isn’t required, you just need to look at the elements that effect the cash in your business.
“Simply put, the better we are at managing our cash, the more successful our businesses will become – there is no compromise to this statement, it’s purely factual”
Get to work, it will be the best decision you will ever make
Despite the numerous posts you may read across social media or other online content, there actually isn’t only five or twelve steps to improve your cash-flow, there are in fact literally hundreds to consider, too many to list, but perhaps there are some you haven’t thought about. I am going to focus on these first…
Improve your systems – What does this have to do with cash-flow you ask?
Systemising your business structure is hugely important whether you are a sole trader or a business turning over seven on eight figures every year. Being efficient is at the heart of every successful business, it reduces your costs and widens the gap between cost of sale and the sales price.
Employ the best people – People who work with passion and dedication to your business are essential. If they work for the pay slip at the end of the month, they are undoubtedly costing you money in comparison to the passionate employee. This may be because they feel undervalued, or out of their depth. Motivation and training are key ingredients to building successful teams, and an important commitment to developing your staff will increase your capacity to do more. Cost of sale reduces, or capacity increases and you create more cash in your business.
Invest in the best technology – Undoubtedly technological upgrades are a big consideration for most businesses, but efficiency comes from technology that performs how you want it to. Running tired and outdated equipment can have a dramatically negative impact on your businesses efficiency, but ability to perform in front of a customer.
Systemising your business, improving procedures and processes, and having a superb motivated and highly trained team reduces costs, expands on sales and ultimately creates greater profits within the company. Greater profit, provides an increase in retention of funds, so cash-flow issues are minimised.
So you have made systemisation improvements, what is the bi product?
Improvements in your systems means you will undoubtedly explore the financial side of your business, and how improvements can be made to increase the cash and therefore opportunities for the business in the future.
Many service based businesses will invoice on 30 days, but in reality experience anything up to 120 days when getting paid for that work. Suppliers will be knocking on the door asking for their money, and the business owner could be looking down the barrel of a significant negative balance. Negotiating terms with suppliers, inducing earlier payment or indeed asking for payment in advance are all positive answers to improving the flow of cash, but not increasing the amount of cash you can generate within your business.
It’s about the cash in your business
My work with business owners is looking at the finer details of the business and where systemisation can have a major impact on the businesses success. For me, it is a major consideration, and whereas the accountant will be informing you or ways to induce quicker payment and negotiating longer payment terms with suppliers, or indeed recommending the services of a professional factoring facility, my focus is on the meticulous details of how a business functions, and how the business can generate more cash. Generating more cash is the ultimate cash-flow relief, and business owners who spend time studying how to improve systemisation as well as negotiating terms, will have the most success.
More cash in your business means more investment into future success. You can expand your marketing and sales efforts, building a wider audience of potential customers who will buy your products and services. Cash means opportunity, so start systemising now to improve yours!
Start systemising, and here is a guide to help you!