What are the five principles that you need to have as the foundation of your business, to ensure that you can keep the cash flowing? Let’s jump in and have a look at them.
Find out more about this mindset below with Jason!
Number One: Without cash, your business will not survive.
Pretty simple concept, right? However, it’s something that we so often overlook. We get so blown away by all the pretty things that we can do, or we look at others and what they’re doing with their business – what their website says, what colors they’re wearing … we forget sometimes that without cash, our business just won’t survive.
Number two: Understanding your key cashflow drivers.
Sounds fancy but what does that mean? You need to understand where are we getting our cash from. For many businesses, we see cash come in and we don’t think to ourselves, is this coming through from a certain sector? Have we got certain clients that are constantly referring to us? What are the opportunities or the options we have to affect the amount of cash that’s coming in? Without understanding those drivers, then we are not going to know what options or levers we can pull to affect our cashflow, and try to increase or better our cashflow situation.
Number three: Managing cashflow is all about your business processes.
Understand your organizational structure. Who’s doing your sales? Who’s doing your marketing? Are you converting all of your leads? How many leads are you getting to come into your business? Are you the person that’s doing all of that whilst also trying to do your day-to-day operations, your finance and your administration?
If you are someone that’s struggling to get on top of all aspects of your business then your not struggling for cash because of a lack of leads or a lack of sales. Your business is struggling because you don’t have the processes in place to ensure that when those leads do come in, you are able to convert them and then deliver on the quality of work that you need to ensure that person is going to then refer us to someone else. That doesn’t come down to, whether we are good at what we do, it simply comes down to systems, processes, and how our business acts as a fully functioning machine.
Number four: Treating the symptoms of poor cashflow without fixing the underlying causes is time consuming and frustrating.
A classic example of this is our ‘churn’ or our lack of retention of current customers. If we’re spreading ourselves too thin or we’re overpromising and underdelivering, we’re not going to see enough sales. We go out and we hustle, and we bring in more work, but we don’t actually have the processes mentioned in the point above in place to ensure that we can deliver on the work. So, we have people leaving that are unhappy, who are not referring and are in fact putting people off us. But then we think that we don’t have good sales coming in and we think that there’s a problem with our sales or our marketing when in fact it’s actually the people that are getting spat out the other end are not feeling like they’re getting value for money. If we constantly try and fix cashflow by just bringing in more sales it could just make the problems worse. If we think that poor cashflow might be caused by overheads, we can sometimes cut right back on overheads so much that we are then stopping the business from going out and generating the leads or the sales it needs in order to bring more business in. To understand our cashflow we need to make sure that we are sorting out the underlying causes of any issues and not just dealing with the symptoms.
Number five: You need to be prepared to make the process changes.
If we are not actually prepared to face the hard truth that we need to invest in help, bring in extra resources, or maybe actually start paying some other people to do the work for us, then we are not going to be able to make process changes. It takes maturity and reflection to grow a business, sometimes realising that actually, we can’t do all this on our own. It is okay to ask for help and to bring other people into your business to help run it or to make changes to ensure you are, for example, charging enough. Be prepared to make the process changes, follow through with them, be held to account for them, and then acknowledge the change that’s been made.
So, there you have it, keeping the cash flowing in our business really does come down to those five key principles. If any of this resonates with you, you’re worried about your cashflow, or you don’t understand your cashflow at all, then please make sure you get in touch with us at SMYD Accounting / Advisory. We’d love to help you!
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