How is your cash flow after the trading conditions of the last 12 months?
We would all like to remember what we did to ensure that cash flow was good – let’s try and learn the lessons we were all forced to review.
Is your cash flow poor? What can you do to improve it?
So what is poor cash flow?- it is when you are constantly spending more money than you have coming in. So what action can you take to avoid it becoming an insurmountable problem and you need to shut up shop. Just remember – poor cash flow is one of the key reasons for business failure.
So, before it is too late, have a look at the most common causes of poor cash flow – and importantly – take action to fix it.
Low profits – profit is a major source of cash, usually from sales to customers or the sale of assets.
The reason for low profitability include:
- Sales and marketing operations not working well
- Low staff productivity
- You are not charging enough
- Ordering and delivery processes too sloe
- You have high uncontrolled spending
Over investment – review your “nice to have” and “ must-have” lists
Expanding too fast – have a plan, stick to the plan, review the plan often.
High Overheads – keep an eye on costs that are not directly related to production and selling (rent, utilities, etc). Continually review your options.
Unexpected Expenses – such as loss of staff, plant breakdown, new competition, etc – review non-essential outgoings. Have some funds tucked away to cover the unexpected.
Too high withdrawals – this is self-explanatory but highlights the need for a budget and sticking to it.
Pricing – too low and your profit declines. Too high and your sales volume declines. Review often. Also, make sure that your Unique Selling Proposition (USP) is still valid.
Overstocking – self-explanatory. Have you got excellent data on which to base your decisions?
Poor Financial Planning – self-explanatory. Plan, review, forecast.
Late payments – this can be a big influence. Make payment easy for your customer. 75% of SME owners say that late payment has a negative impact on the business.
If you want some help in reviewing your cash flow position and taking action to improve it, contact me today for a one-hour free consultation and follow up report.
Robin Martin
P.S. This article is part of my Secrets of Success series, aimed at helping business owners and entrepreneurs with some of the key components of business success. The insights I wish I’d had at the start of my business career. I hope that by passing on these little gems of knowledge I can give you some support and help you along the pathway to growth and prosperity.
