7 Ways to Manage your Money
Cash is King
I have been noticing in my social media feeds recently several posts about various businesses going under. Many of them start-ups that had secured and burned through millions in funding. So, I thought sharing a few cash management lessons I learnt along the way may be useful for recruitment entrepreneurs.
It’s easy to have a few bad months, lose a little motivation and before you know it the numbers are down and if you don’t address it with a clear head, you can quickly be facing a significant debt.
“When you start losing sleep at night for the worry of wondering how to climb back out of increasing debt – you have had your head in the sand for too long.”
How to Stay Debt Free
1. Always Know your Cash Position
Have a cash flow spreadsheet that lets you see how much you have in the bank at all times, what you owe and when and based on past payments when your invoices are conservatively likely to be paid. You can find a simple cash flow template easily online. Here is a link that has several templates and also gives some easy to understand instruction on how to create a useful cash flow report. My strength isn’t the financial side of the business, so I have brilliant support that takes care of most of it. That said, I always like to do the cash flow myself as it is an early and clear indicator for the business of exactly how much cash you have to run your business in the short term.
“Available cash is the only thing that will keep your doors open.”
2. Don’t be too Quick to Spend
It’s so easy to spend money in business and justify to yourself that this service or product or expensive new recruit will improve your bottom line. Before you spend the cash, ask yourself, “if it doesn’t do what I hope it will, where does that leave my cash position and does that make my business vulnerable? “Take time, think about it first.
3. Remember You Know Best
There is no end to what you can spend your money on and every well-meaning supplier will believe it is with them. For example, you may decide you are going to send regular eDMs. Will a simple solution like Mailchimp do the job for you and match your marketing capability or do you need all the bells and whistles and analytics that will cost you more? Will you use it, will it take more time to learn and implement and take your time away from your core focus of generating placements? Many tools can now be bought month to month and are being improved all the time, so instead of going all out in the beginning, especially if you’re not an expert in that area, start small, you can always upgrade. If a sales person is advising you need X, make sure you ask them why and dig into the product detail as this will also help you uncover more information to help you decide what you do or don’t need.
In my experience, most of the time you don’t need what they are convinced you do. This is not because they are being underhanded, it is because their view is from how great their product/service is, not from the depth of understanding of your business that you are privy to and what it needs across the board.
4. Pay your Bills on Time
This may seem counterintuitive, but unless you are in real trouble and can’t pay, paying on time builds credibility with suppliers and they will support you if times ever do get tough. It also makes it less likely you will spend that money on something else until you can afford it!
5. Stay on Top of your Debtors
Sounds obvious, but it’s amazing how quickly this can get away from you if you don’t have someone in your business responsible for this. Most late payers in my business were oversights as opposed to intentional and a quick phone call will often lead to cash in your bank much faster. It will also help you get a read on whether or not there may be an issue with your client paying.
6. Build and THEN… and only then, Fill
Apart from closely watching cash flow, this is the biggest lesson I learnt. It’s very easy as an entrepreneur to get excited. You are passionate about what you are creating and why wouldn’t it all go to plan! Mmm, if only. Max out your resources and then scale up. The best example I can give you here is renting an office. In the early days of ICUR recruitment, I moved from a shared office space where there was no money wasted on excess rent to an office that could seat 10 recruiters (because I had great plans of expansion – of course!) Dumb move. By then there were only 4 of us in the business, so I was paying almost triple what I needed to in rent without being able to justify it with revenue. My justification was, of course, that I would recruit quickly and fill the space – oh dear bit naive. We ended up subletting until we grew and a year or so later were on track but that was a lot of hassle and what would have been a lot smarter would have been to keep subletting until we had more recruiters to justify an office.
7. Don’t “Buy” Top Billers into your Business
If recruiters are that good, they will be more motivated by great bonuses. Don’t be tempted to overpay people, it will come back and bite you on the tarhoodie.
Pay people a fair salary, give them a great place to work, all the tools and support they need to be successful and pay them a great commission. Less risk and a win for both of you. Ultimately, this enables you to pay better people more and incentivise them to stay.
A little more….
I know I said 7 lessons but once I wrote this blog I thought I’d have a snoop around the web to see if I missed anything and came across this site that reiterates some of the above and adds a bit more too…
I’m normally a very positive person who likes to focus on what is possible so debt to me is a “yawn” topic but the reality is cash is the fuel for your business and if you don’t give it the attention it deserves it can turn on you very quickly and it can cause you no end of trouble.
Please don’t think the sentiment of this blog is to not invest or take risks, that certainly isn’t my intention and by the very nature of being an entrepreneur you will most likely do this anyway. Just be mindful there is always someone or something you can spend your money on, just make sure any risks you take are calculated.
Thankfully on the couple of occasions things got sticky for me I turned things around and learnt from them quickly. I hope my experience can help you stay on top of your cash flow too and help you build the thriving recruitment agency you deserve.
Thanks for reading!
Belinda Kerr – Founder