1 – Don’t Ignore The Numbers
When it comes to the numbers in your business, knowledge is everything. At any given point you need to know what you owe out and what is owed to you. You need to know how much you have tied up in stock. You need to know how much you will need to fulfil orders. You need to be able to pay yourself, pay the bills and pay for any help you employ. Make sure you know your costs and how much profit you make on everything you sell, as an absolute minimum.
2 – Don’t Count Your Chickens Before They Are Hatched
In other words don’t assume you have an order until you have the order! Don’t assume people will pay on time. Don’t buy extra stock ‘in case’ you’ll need it. Don’t overstretch yourself. One of the biggest cashflow killers is tying up money in stock or supplies or committing to costs without having the cash to cover it. All it takes is one non-payer, late payment, cancellation, change in circumstances to throw your plans out of whack and your cashflow with it. The last thing you need is to end up with stock you can’t quickly liquidate or commitments you can’t meet because you trusted someone to do the right thing. Get your terms and conditions in place. Have a clear refund policy that protects you if someone cancels once you have ordered stock. Don’t take risks on someone else’s behalf using your business. Protect your downside (in other words don’t commit more than you can afford to lose) and be mindful. It’s not magic money, you have to earn it to cover what you pay out, and then some.
3 – Don’t Guess The Important Stuff
Don’t guess how much you have taken in sales, KNOW it for certain. Track every sale coming in. Track deposits. Track instalments. Know what is due, when. Look for patterns. Know your quiet times, so you can come up with ideas to drive additional business. Know your busy times so you can plan for them and manage your cash accordingly. Where you put your attention is where the magic happens, so if you track your sales and understand how they work in your business, you will get more. Know how much of it is profit at any time. This is important because your profit is what turns into your salary or gets reinvested back into your business – if it’s not profit then you shouldn’t be spending it unless it’s directly related to delivering your products or services.
4 – Don’t Let Payments Slide
If you give credit to customers, collect it when it’s due. Don’t let embarrassment or fear of offence stop you. Think like a business owner and put processes in place so you know what is due, when. Make your credit or payment terms very clear at time of purchase. Get the customer to read, acknowledge and sign them so they can’t come back later and say they didn’t know how it worked. On the day the money is due (or even the day before) send a polite reminder notice. As soon as the payment is overdue, chase up every day or two.This is YOUR money. You are not here to cashflow someone else’s business. Successful business owners don’t let their money collection slip. You’re doing nothing wrong by reminding late payers and requesting payment, you are simply running a business in a professional way and if they don’t like it they can go elsewhere. It’s not worth putting yourself under stress trying to accommodate bad payers, when you could focus your attention on your Super Customers and have people who would happily pay in advance.
5 – Don’t Leave Everything Till The Last Minute
If you know you have shows or events or busy times coming up, plan ahead, not a week or two but a few months ahead. That way you’re giving yourself time to buy stock a little at a time, make the most of special offers and set aside cash as a contingency. Businesses are more likely to run out of cash if they get caught out or haven’t planned ahead. Don’t put yourself in that position.
6 – Don’t Fritter Your Money
You have to earn every penny you spend. It’s very easy to spend, spend, spend but how much will you need to sell to replace that? If you start adopting this attitude, you will soon get a different perspective on your business. That swanky new laptop bag might be gorgeous but if you have to find 5 new customers just to cover the cost of it, is it really worth it? If you’re spending money on stuff for the business, make sure you get a good deal but don’t talk yourself into stockpiling to get a ‘wholesale’ price, otherwise you’ll potentially have loads of stock tied up in the business that could take months or years to turn into cash. Always think about the return you’re going to get on anything you spend.
7 – Don’t Say Yes To Every Customer
Choose your customers (not all customers are good customers). Sit tight, be really clear who your Super Customers are and market to them rather than saying yes to everyone. Make wise decisions.
Don’t cashflow someone else’s business to the detriment of your own. Don’t be bullied into putting up with someone else’s bad money attitude – you keep control over your business. Have confidence in yourself and your ability, you know more than you think.
I know it can be tricky if money is tight but the more you plan, the more you know your numbers and the more you realise that cash is the lifeblood of your business, the more likely you are to make sound business decisions and protect your business.
My sales coach used to make me justify every penny I spent for months until I understood how much extra profit I’d need to make to cover my less-than-thrifty spending habits.
I promise I’m not a killjoy, I want you to love your business but I also want you to keep having a business and not fall victim to dodgy cashflow.
Did anything in this blog resonate with you?
I’d love to hear from you in the comments and I’d also love to hear any other cashflow tips you have. Protect your cash and keep building your gorgeous business.