If you’re running a small business, then you’ve likely had an issue with cash flow at some stage. It can be one of the toughest aspects of running a business, and too often it is one that isn’t addressed until it’s too late.
Managing your cash flow is SO important, it really is the life blood of your business, and if left unaddressed, can send you to the wall.
When I say cash flow, I’m not talking about profit. It’s easy to think if you’re making sales, and you have money coming in, then your cash flow is fine. That’s not always the case.
Let me give you an example. Back in the earlier days of our business, things were on fire. We had lots of projects on the go, and lots of prospects coming in the door, but financially, we were strapped!!
Let me explain. We had clients who had payment terms of more than 90 days after the invoice was submitted, and we had contractors who had payment terms of 14 days. We owed contractors tens of thousands of dollars, and we weren’t going to see funds from our clients for months.
Our cash flow cycle was really messed up.
If you took a glance at our profit and loss statement, we looked like a roaring success, but we weren’t. We were stressed to the max, and if we continued down this road, we were going to join the more than 60% of small business owners who failed within those first few years.
To be really clear, cash flow is way more important than profit, especially if you don’t have a decent buffer to carry you through. Profit is great to look back on, and even to forecast your future performance, but to keep your business ticking over, you need good cash flow. The funds that are running in and out of your business, and you want the amount coming in, regularly, to cover what is going out.
We dealt with our biggest cash flow problem by meeting with our clients and contractors to negotiate terms that would help our cash flow. It made an enormous difference to the success of our business.
We also put a number of other procedures in place to manage and maintain a positive cash flow in our business. I’ve put them together in an eBook to help other small business owners. You can download your free copy here.