Running a small business is both rewarding and challenging. In today’s world things move pretty fast, so depending on which side of that equation you’re on, things can get really great or really tricky very quickly.
The most common challenge we hear about from small business owners is cash flow. That usually sounds something like “cash flow is terrible” or “cash is a bit tight”.
The reason why this is the most common issue raised by small business is simple. Lack of cash is like a heart attack for the business. BANG! It’s impossible to ignore, it’s immediate and without urgent treatment it could be lights out.
There are a number of possible solutions to put in place when this situation arises. Often it’s a combination approach that’s needed, some solutions will work better depending on your circumstances:
1. Getting some funding in place such as a short term loan or temporary overdraft facility
2. Speaking to your suppliers to spread out payments over a number of months
3. Chase up overdue customer accounts and get cash in quicker
4. Put better procedures in place now to improve your credit control
5. Start digging into your costs and see where savings can be made
6. Get a short term cash flow projection in place to help you look forward and plan/budget better
Another area to look at can be a bit more emotive and that’s looking at how much you’re taking out of the business. Some small business owners pay themselves when the cash is available but with no real thought for what cash the business needs to retain to avoid a cash flow crisis.
You should take a look at your personal finances as part of this. Be honest (and brutal), determine how much you REALLY need each month for your personal needs and bills and stick to that. You can take a but extra once the b usiness cash flow is in a better position to do so.
Of course, whilst cash flow problems are the most common challenge we hear about, the underlying cause is always the key issue to be addressed, and that’s lack of profit in the business.
Lack of profit won’t be obvious, it can take time for its dehabilitating effects to start eating away at the business. Even with good credit control, getting paid in advance, regulating your own spending………..Lack of profit will kill your business eventually.
What you need to be doing to avoid this challenge is producing, at a minimum, monthly accounts for your small business and sitting down with your advisor to review the numbers.
Then you can see how well (or not so well) the business is doing and put plans in place to improve the results.
Cloud accounting systems and apps such as Xero, Chaser, Float, Slide, GoCardless and others can solve lots of your challenges. We’ve implemented loads of these systems for small businesses and saw a positive impact on their profits and cash flow.
No matter what your challenge is, the time to tale action is now. Taking action will help ease your mind of worry and will start you on the path to a better business.
#MakeMoreMoney #SaveTime #BetterSystems #PeaceOfMind