I often use the analogy of cash being likened to oxygen for your business - so the next question is - have you got enough oxygen?
Is your business breathing sufficiently to: -
- stay afloat and ensure you are in business in 2023
- generate surplus cash in view of future needs?
It may be an obvious statement, but it is critical that your business generates cash, so it’s worthwhile taking a step back and assessing whether you are generating enough.
If you’re concerned about cash generation and 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 drivers
Keeping 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 area and hold accountable
- Set targets and automate processes so that control of these areas is not a drain on resource, but rather the opposite
What should you do next?
Cash generation is a constant theme with any business, but it really is pivotal to its smooth running.
To ensure you’re generating the cash necessary to keep going, you need a proper strategy and plan in place – we would always advise you to contact your advisers who will be able to help you strategize and implement a plan to ensure your success.
If you would like more information on how we can help you and your business, contact us at firstname.lastname@example.org or call 02476673160.
Please note: This article is provided for information only and was correct as at time of writing (28/02/22). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance. No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.