Nine Ways on How to Avoid Cash-Flow Problems in Your
Business
by Syd Stewart
Published on this site: February 7th,
2004
Most
businesses that fail do so because of cash-flow difficulties.
Nature is
similar to business in many ways, so what can we learn from nature and evolution.
In
nature, proteins support all the vital activities or functions from movement,
growth, to reproduction. The word protein means from Greek of first importance.
Proteins form the structural basis of all living cells! Proteins are used for
building and repairing cells.
Cash is a key business protein. In humans,
proteins are sourced from nutrients such as meat, fish and eggs. Lack of Protein
prevents proper growth and repair. Protein deficiency can cause disease.
So
here are nine ways to avoid cash problems:
- Ensure you have enough
funds before you start any venture. Have cash
to last three times longer than
what time you think it will take.
- Set the right price. A banking
friend, with years of experience working with small business, tells me price setting
is one of the biggest problems with small firms. Many businesses fail because
they did not charge enough. It's crucial. Test your market. Sometimes lowering
prices can raise more sales and revenue. Add more value for your customer, especially
if it does not cost you too much, and then raise prices. Be confident, do a good
job and raise prices.
- Avoid doing business with folks that you
suspect have cash problems.
- Raise invoices promptly.
-
Be strict; don't give further credit to those who won't pay their existing bills.
-
Raise frequent statements to chase your money. Some folks won't pay until they
receive a statement or several reminders.
- Follow up with a call
if a bill is not being settled. Check to see if there is a problem with your goods
or services. You need to be proactive.
- Establish a Sales Ledger
with an Aged Debtors Report
- Produce Monthly Profit/Loss and Balance
Sheet Reports no later than 2 weeks after each month end - If you don't understand
these reports - get help fast.
Finally build these ways into the routine
of your business. Create written procedures for your staff to follow. Remember
cash like proteins in nature is of first importance to your business.
Syd Stewart is a chartered engineer with 30 plus years experience
of managing and owning a business. He is author of the 'Smiling Owner' E-Handbook
in which simple evolutionary business solutions yield Greater Profits, Sustained
Growth, Security, and More Fun for small businessowners.
See http://www.smilingowner.com
for more information.
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