We often use the analogy of cash being likened to oxygen for your business.
So the next question is - have you got enough oxygen?
It is absolutely critical that your business is generating cash. This may sound obvious, but you may just need to stand back and have a look at whether you actually are, or whether you are generating enough.
If you would like more oxygen and energy in your business (i.e. cash), here are 3 areas to look at:
Income exceeding outgoings
Sounds an obvious statement, but it is so true. Unless you are generating a decent TRUE net profit (after actual owners drawings and tax), it will be almost impossible to get to a position where you are generating cash sustainably. An experienced financial and business advisor will show you where you need to make changes and formulate an action plan to either start making a true net profit, or keep increasing it.
It’s about this time of year, that we are starting to think about our strategies for next year. It is definitely the ideal time to take a strategic and financial view, and establish whether the business you are building is one that will generate cash. Do you know which customer groups are generating cash? Do you know which product groups are cash-producing? And vice versa. You need to know these things, so that you can make informed decisions based on facts and data, which will form the basis of your strategic direction into next year.
Control of 3 cash driversKeeping the focus and control on stock, debtors and creditors is a crucial cog in the wheel of cashflow management, and cash generation strategies.
- Regularly report on these areas
- Have different key management personnel responsible each areas and hold accountable
- Set targets and automate processes so that control of these areas is not a drain on resource, but rather the opposite
I know we're always talking about cash, but after all isn't that part of what motivates us in life?!?
Just in closing – a dream of having more cash does not just happen. It needs a strategy and a plan.