Your Cash Could Be Hiding In Plain Sight
Many small businesses focus on ways to increase their income or reduce their expenses to maximise the amount of cash that flows in. While these two steps are crucial for accumulating profits, managing your cash flow is more about the actual timing of the monies that flow in and out of your business.
One of your principal goals should be to manage your cash flow in such a way that you always have more money coming in, and retain more money on hand, than the monies that are going out of your business. But, what do you do, if no matter how hard you try, the money just isn’t there when you need it?
If you have adequate cash coming into your business, but, it doesn’t seem to be flowing in at the right time, then your money has probably fallen into one of those unseen cracks, or “money pits” that exist in every business.
Take some time to investigate the following areas of your business very carefully. Don’t be surprised when you find that your money is there, hiding in plain sight and tied up in your business!
Do you know the average age of your accounts payable?
On average, how long does it take your clients to pay you for your work? If you discover that it takes a while for one or more clients to pay you, there are several steps that you can take to improve payment time. These steps include creating a system that invoices clients immediately after the work is done, as well as sending automatic reminders that the payment is due or past due. Don’t be afraid to pick up the phone and ask your clients, nicely, for payment, especially if they are late. You might even consider offering a discount to customers who pay early, or take immediate steps to make their accounts current.
Do you know if your business processes are efficient and on target?
Our actual business processes are another area that can quickly become a money trap. Take some time to investigate how efficient your business processes perform. Look for areas where you can cut costs by looking for ways to simplify methods. Payroll, shipping and material costs tend to be prime areas where money seemingly disappears, so cut back on the cost in these areas as long as it will not decrease performance or harm your customer satisfaction.
Do you know your turnover on your inventory?
The third most common area where businesses tend to lose cash is in their actual stock level of product. Do you know how rapidly you are turning over your stock, or do you have hundreds, if not thousands, of dollars tied up that’s just sitting there and growing older and more obsolete by the minute? If this is the case, you may need to look at ways to increase your turnover in the short term, such as running a sale or offering a discount. Going forward you will want to institute systems to help you better manage your stock levels to find your hidden cash and keep it from falling through the cracks again.
It’s difficult enough to keep the doors to your business open if you are losing money. But, once you know where to look, you can discover your money’s favorite hiding places and recover it!
How do you plan to use the hidden money that you find? Will you use it to grow your business or achieve another dream? The choice is yours! Why not share your plans for your money in the comments section below?