Cashflow can be a headache for any small business, particularly in the early stages. It is an unfortunate fact that many otherwise promising businesses fail in the early stages due to cashflow problems.
If you’re struggling to keep on top of your cashflow, try not to panic. When it comes down to it, cashflow is mainly about people and systems. Get those two elements right, and your business could be on track for a much smoother ride.
There are a few traps that businesses commonly fall into when trying to manage their cashflow.
1. Ignorance is definitely not bliss:
When it comes to handling your cashflow, it is essential that you have a monthly plan, and know what is due to go in and out, and when. This can help you feel more in control and plan ahead for expenses.
2. Not having any/enough working capital:
Lack of working capital is enough to stop any great business in its tracks. You need to plan for cashflow issues, and have enough to cover deficits, or you could end up going under – even though your business may be sound, and doing well.
3. Not building relationships with key financial figures:
Make friends with your bank manager! Being in regular contact with your bank manager, accountant and anybody who has any control over your financial situation, is crucial. When money is tight, these are the people who may be able to pull you through so make sure they are on your side.
4. Neglecting sales and marketing:
How does your business generate cash? It may seem obvious, but a surprising number of businesses don’t take a proactive approach to their sales and marketing. Make sure you have a plan in place to help you generate more cash, and allow your business to grow.
5. Not using proper reporting systems:
Software applications like Quickbooks and MYOB can take a lot of time and stress out of managing your cashflow, and reporting your business income. Make sure you keep up to date with everything by taking advantage of easy to use technology.
6. Not managing your outgoings:
Keeping your business expenses as low as possible is not only advisable, it is essential, particularly when you start out. Less money spent on outgoings means more cash in the bank, and a reduced risk of cashflow problems. Make sure you are managing your business expenses carefully, and not wasting money.
Once you have your systems established, and a steady stream of cash coming in, your cashflow should become much easier to manage. If after trying all this you are still struggling to get to grips with your business cashflow, getting external assistance can help you get things back on track. Don’t let cashflow issues be the thing that ends your business! Be proactive, and manage your cashflow, and you can hopefully enjoy growing your business for many years to come.