We know mastering cash flow can be a headache and many businesses fail because of it. In fact, 41% of Australian businesses that HAVE failed have cited inadequate cash flow as the reason (Source: ASIC 2013).
They have blamed the failure of the business to thrive on inadequate cash flow.
But I say it’s more likely an inadequate UNDERSTANDING of cash flow and the importance of forecasting is the cause. Inadequate cash flow is simply a symptom of a ‘head in the sand’ approach to business.
Let’s treat the cause and fast track our way to money mastery and business success with these tips on how to get cash flowing into your business instead of dripping like a leaky tap!
- Know what’s going on
Running your business without a monthly P&L, a weekly Cash flow Forecast and a clear picture of your breakeven point is like flying a plane without instruments – very dangerous! You need to review these basic financial statements and you need to understand them. There is a fantastic range of financial management and accounting software out there, allowing you to automate the financial side of your business so that real time fiscal information is at your fingertips. This allows you to make strategic and smart business decisions quickly and decisively.
- Get your cash gap under control
The cash gap is the amount of time between paying out money for the product you produce and receiving money for the sale of the product. The shorter the gap, the healthier your finances. Streamlining your invoicing process, following up outstanding debts and managing operational and distribution costs are ways to minimise the cash gap. Click here for more information on the cash gap.
- Smart and efficient forecasting
Many business owners sit within their business and don’t look far enough ahead. You should be cash flow forecasting at least three months ahead, keeping an eye out for any bumps in the road ahead. Good cash flow forecasting can be done in Excel and will give you the information you need and the confidence to make decisions based on that forecasting. You’ll know when it’s time to tighten the belt before it’s too late.
- Outsource to an expert
It’s hard when you’re a one-man show to know when to outsource to an expert. How do you know when the time is right? When you’re doing something poorly or not doing it at all. Successful entrepreneurs recognise when they have gaps in their skill-base and out-source or delegate accordingly. Handing an element of your business over that you are not familiar or confident with, such as cash flow forecasting will save you time and money – guaranteed. Or if you do have staff and require strategic assistance around financial management and cash flow, a business coach will help you see the forest for trees!
The trick to not becoming another statistic washed up on the shore of Australian business failures is to get proactive. Always look forward at ways you can improve cash flow. Be proactive about record keeping, use smart accounting systems and put your hand up for help when you need it.
Before your business becomes another statistic. Book in for the 6 Steps to Building a Better Business workshop.