Navigating COVID and the aftermath is an unprecedented challenge for businesses and business owners globally. The rules have changed but the game of business has not – never run out of cash. In the previous instalment, I discussed the need to learn new skills, keeping a good handle on business and personal cashflow, step up your cashflow planning, re-evaluating your supply chains and better managing your level of discounting. Today, I continue cashflow discussions.
6. I have made some profit; can I take the cash?
Profit may not be an indicator that you have available cashflow to spend. Cashflow can hide in many places in your business and it is your job, as a business owner, to make sure it is freed up so as not to hamper the business moving forward.
Many business owners have found out the hard way that their businesses bank balance is not an indicator of what funds you have available to spend in their business. In fact, it is a lag indicator. This means there may well be payments needing to be made for purchases, payroll or other liabilities before funds are available to either the owner or for the business to use elsewhere. Planning and allowing for these require a cashflow forecast and for it to be updated at least weekly.
7. Keeping it lean but not mean
What we are looking for is just like a good bit of steak, all meat, and no fat. We want to keep overhead costs tight, but not stupidly so. There is a balance between necessities and luxuries. There is a fine line between the level of overhead you need to keep the business operational and have some capacity for growth versus running it too tight.
8. Doing stupid when stressed
When was the last time you looked at your business with fresh eyes to see where the opportunities are? Take the time to have a good look at your business with a keen eye on future potential in the marketplace. It is unlikely that you can achieve this sitting inside the four walls of your business. You may need to be outside, in a different place (cafe, beach, local park) and it may take some time to switch off the “noise”, de-stress and think clearly to focus on the future.
9. Losing margin and profitability
Now more so than ever, cost structures are changing. Some industries are seeing significant and continuous price rises on cost of goods. Keep focused, be vigilant and be careful. Your business needs to keep its margins to trade through this turmoil profitably. Stay focused on upside potential.
10. Tight times call for different thinking
The current marketplace has undoubtedly created opportunity for some, much the same for others and really tough times for many. There will continue to be a long list of businesses that are unfortunately unable to make it through to the other side.
Is there cash hiding in your business that can be freed up to be utilised now? Cashflow often hides in debtors, sits in your warehouse as inventory, occupies a parking bay as an unused vehicle or on site as surplus plant and equipment.
Does your business have available finance it can use if needed? Are you able to pay down any loans or credit cards if you have surplus cashflow?
Is your business making it easy for others to do business with you? What do your customers need – credit card payment options? Buy now, pay later solutions? Now is not the time to be shy or to hold the belief that these are not for you if your business qualifies.
Paul Roach, business strategist and author of “Smarter Business Stronger Cashflow”