How Do I Get More Cashflow?

Cash flow is the life blood of every business!  But many businesses struggle to have enough. 

My favorite way to talk about improving cash-flow relates to a systematic 5-step process to increase Revenue and Profits.  We can do that in a later article.

Today I want to consider some of the more defensive issues, because these are often the hidden issues that cause cash flow to leak out.  Often, these situations leak out too much cash flow to allow the more advanced business development strategies to succeed.  

Every business owner is different and has different experiences, so specific causes and solutions will be different for nearly every case.  However, there are common examples that can be used to consider your specific course of action.  A few real-world examples:

• A business that does projects and takes deposits at the beginning, but then spends the deposit money on items not directly related to that project, and then runs out of money before the project is complete.  There needs to be a discipline to take personal payment from profits. 
• A business that bids on projects, performs the projects, and neglects to consistently compare the actual costs against their estimates.  And then they cannot determine if the estimating practices are wrong, or their execution practices are sloppy.  Usually both can be improved. 
• A business that fails to collect payments on-time or has extended payment terms.  Your business is not a bank.  (Unless you are a bank.)  If you deliver your product or service – make sure you collect payment. 
• A business that does not set some kind of budget as a plan and follow the budget carefully.
• A business that sets prices too low.  This is the fastest way I know to go out of business. 
• An employee is embezzling money because he knows he won’t get caught.  This can happen in an amazing number of situations other than just the accounting dept.
• A business that does not keep cash reserves in the bank risks running out of cash – and bankruptcy.  I recommend at least 6 months operating reserves.  In a separate bank account from current operating cash.  Based on recent economic history, 12 months reserve is better.

These are all scenarios that can destroy a business and its brand if not caught early and managed. 

Business owners that permit these conditions to persist miss opportunities to make more money, or use their money more effectively (meaning profitably).  Good accounting systems and frequent attention to financial reports can help catch these kinds of issues early enough to stop the bleeding.  All these situations can be solved by learning to read and use the standard financial reports (Profit & Lost Statement, Balance Sheet, Statement of Cash Flows, A/R, A/P), and design other business-specific reports to support gathering feedback on how the business is performing. 

I mentioned a 5-step systematic process to build cash flow.  This system is capable of helping a business grow Revenue 30% to 50% per year.  It is very robust, and I am happy to share how it works.  But it won’t work without mastering your financials first.  The tools that manage the kinds of situations described above are the same needed to make that system work. 

How much would you like to grow your income?

Do you want to know your key focus area to help grow your business? Try our 3 min Assessment Quiz at https://stevechiama.nextlevelassessment.com/?source=LI_Event - 6Steps

If you would like to talk about your specific situation, hit the “SCHEDULE A CALL” button, and let’s talk about your specific case.