Businesses fail from lack of cash not lack of profits. Profits can be manipulated whereas cash cannot be!
The recognition of this fact alone is a milestone for any business. When people often draw up a business plan they can quite easily see a start-up business generate a profit on a regular basis throughout the early years of training. However, cash can reveal the reality of the situation.
Particularly when it comes to companies first starting up, with no or limited trade history, suppliers will be hesitant about providing any sort of credit so they are more than likely to have limited or no credit. Customers on the other hand will be looking for the longest period of credit available and will often pay late.
This is not however just a problem for start-up businesses as growing businesses can face the same issues also. As companies grow, really pushing on, dealing with significantly bigger clients, they might often demand significant periods of credit and over and above this might question and query several things on invoices raised. Although suppliers will now have developed a relationship with you it is unlikely they will even extend the same period of credit to you that your larger customers might demand.
I hear you ask what can be done to manage such risks?
The first thing is understand your cash flow needs – what does your business need and when by?
Research your customers; even if it is just online, do confirm the likelihood of delays in payments.
Consider the impact of your decision on your cash flow. How will this impact on existing customers and potentially future customers? Don’t just think about the actual cost, think about the opportunity costs i.e. what are you giving up in order to get into bed with larger clients?
Ask for staged payments to ease the cash flow burden.
If the figures don’t stack up, WALK AWAY!
Cash is definitely king, keep an eye on it and don’t let it be the end of you and your business!
One of the biggest costs to many organisation is staff yet when it comes to analysis costs, the salary of employees often tend to be as far as the analysis goes – this person earns X and that person earns Y. Let’s flip that question round and ask what does this person contribute to the our business. This might seem like a very similar question but it is actually very different.
To start to answer this you really need to understand the what each employee is doing within the business on a daily basis. There is a quick solution that will help you answer this question – timesheets. Have each and every one of your employees fill in a timesheet and even do it yourself as it will generate some interesting results; provided people are being honest that is. Again you might think well how can I ensure that people are being honest? There are a few things which again might or might not be available depending on the industry that you operate in:
There is software available that automatically logs time being spent on specific tasks
Have senior management oversee the filling in of these, counter-sign and review them
Next you can compare how much money each member of staff brings into the business, how each member of staff compares productivity-wise, how time spent on jobs compares to budgets and previous jobs and so much more. This information then acts as such a powerful tool for so many things including:
Using it to ensure that work that is billed is profitable
Allows you to allocate your staff to those tasks where they seem to be most profitable and know which work in the future is most profitable
Allows you to monitor performance, support and act
Identify where time is wasted such as on administrative tasks whereby the employing of administrative support might well be a worthwhile investment rather than having senior members of staff spend their time on unprofitable tasks
Also, so much time can be abused with social media such as Facebook and Twitter. We work alongside an HR expert on issues such as this so click on the link below for more guidance on this matter as it is so often overlooked: Click here to read more http://www.markdavidhr.co.uk/unsociable-social-media/
In short, some very small changes to how you work can mean that you get the most out of your existing staff and ensure that you are looking beyond each of their salaries.
Always looking to improve our services, we have just finished making our website “mobile ready” so that our customers can find the information they need, even when they’re on the move.
Try it on your mobile, smartphone, or tablet.