Every Friday we just want to stop the world for a moment and give you a couple of real tips to think about that will make a real difference to your business and in your life.
Cash flow remains a hot topic and so it should. We have spoken about it before both in our articles and during some of our videos and facebook live sessions. However, I thought I’d leave you today with this one point to ponder and reflect on over the weekend.
“Am I a bank and/or does my business make its money on the futures market?”
Well maybe, in which case stop reading and get back to studying the various money markets.
If you’re still with me, it means that we need to talk about something Paul Clitheroe send on one of the morning shows yesterday and it’s something that deep down, we all know. We need to spend less than we earn to get ahead. Here’s the thing though, maybe you do and you still find yourself unable to shift the needle. Perhaps you even find yourself sliding backwards a little bit. Why? How? How is this possible? What do I do?
Hope for the best, plan for the worst
Have you heard that before? Rather than looking at this as a pessimistic view, think of it as realism. The mistake a lot of small businesses make when looking at their expenses is that they calculate them based on what should come into the business and ignoring what might.
If you believe the simple formula: expenses = income – profit, well good at least you’ve not simply said, “well the expenses are the expenses and we’ll just settle for whatever’s left over.
Tip: Protect your profits, put them to one side, you’ve worked for them, you’ve earned them, they are yours.
Okay, so you know that in a good month your million dollar business might turnover $100k. Great. And you know that on average you’ll turnover $83,333. Alright but what about the down months where, because of seasonality or what-have-you, you’re only going to make $60k… for two of the next three months. If you’ve simply averaged out your expenses to say $63k/month you’re in for some pain through this time if you have not adequately planned for these eventualities.
Tip: Look more closely at your numbers by hitting the zoom-in icon on your finances. Looking at individual months is sometimes more helpful than predictions based on annualised numbers.
Let’s be upfront
The other thing you can do and should do to get the cash flowing in the right direction is invoice for at least a part if not all of your fee upfront. This indicates that you are committed and that the customer/client now has a vested interest in the goods and/or services you provide. Importantly, it also places you in a better position cash flow-wise.
Another important point: obviously, you wouldn’t agree to say, 30day payment terms and then add an interest component to the invoice. You can’t – that’s not what you agreed to and, as already mentioned, you’re not a bank. If the payment is late, maybe but by then the horse has bolted in a way – you’re already 30days+ without any kind of payment. Let the pains begin.
Tip: remember, offering generous payment terms is not a must. Get comfortable with setting terms on your terms and sticking to them.
With a sound reputation for getting results and providing valuable customer service, you’ll find, as we do, that people won’t mind paying upfront.
Have a great weekend!