7 Cash management tips to keep you in the black.
I know…..not a very sexy topic, but important!
1. Always know your cash position
Have a cash flow spreadsheet that lets you know:
- How much you have in the bank at all times
- What you owe and when
- When (and based on past payments by each client) your invoices are conservatively likely to be paid.
Here is a link that has several cash flow templates and also gives some easy-to-understand instructions on how to create a useful cash flow report.
I always like to do the cash flow myself as it is a “pulse” on the business and a clear indicator 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 spending this money doesn’t do what I plan 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 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 tech 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 salesperson is advising you need X, make sure you ask them why and dig into the detail as this will also help 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 because their view often lacks 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 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. Be 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 must 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
Max out your resources and then scale up. In the early days of ICUR 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 tarhootie.
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 incentives them to stay.
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 you can come unstuck – and fast.
Please don’t think the sentiment of this post is not to invest or take calculated 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.
Have a great week!