Working with small businesses over the past 20 years has brought with it some very interesting experiences. One of the most common experience is that the cash flow management wrong with the business owners make. You might think that only business owners have experienced near death experiences in their company, but I have worked with some very experienced, very savvy business owners who have made this same mistake we mistakes.Much made us cash flow, both in business and in our personal lives has more to do with how we think about money, than they do about how we think about money. Do not cringe - just keep reading! Start to smile and nod, as I'm sure you've made at least one mistake does not matter how logical and comfortable you feel you are about to money.
Mistake # 1 - impulse shopping spendingImpulse shows itself in many forms. This is a networking event you sponsor, a table last minute you take a trade show or computer you just bought for the office. The third item that looks like the things you need to buy in the normal course of business right? For most of them, but we see a computer purchase. You ask me how the computer is impulse buying, you need to run your business and the old just fell. Yup, this is the appropriate sentence is WHY it an impulse purchase. All equipment is mission critical to your business should have a plan and a budget replacement place.
Mistake # 2 - Pay your bill by Bank balanceThis one is by far my favorite mistakes and probably the most common businesses struggling with cash flow. This one is also closely related to impulse spending. Usually what happens is that squeakiest wheel gets the check. You have someone in office or phone payment requirements, so rather than have a potential confrontation by saying, "No, I can not cut a check right now, but I can get a check on Thursday" For example, your online banking logon you and see that you have money in the account and then write it check.This more damaging than not paying vendors to day. You've just taught the people on the other end who wants to put their needs before your own business needs'. Use your imagination about how damaging it can be in the bigger picture of your relationship.
Mistake # 3 - Extending credit to customers who do not creditworthyWhen decide to give credit to your customers, actually lend money to your customers. Your customers fill out loan applications and includes trade references and bank references. References actually call them to find out how much they have been outstanding credit to the vendor. It is important to know how much credit they are looking to receive from you and if they have the same amount of credit in the past in good condition. If you sell high ticket items, do not be afraid to ask for financial statements.
Mistake # 4 - Allowing you to ageYou've may accept credits to your customers and now you need to collect on the invoice. You have many reasons for not collect the money due. You're busy, you do not want to be a pest, or do not want to jeopardize the next major deal pending with your customers. All of these factors, or should I say the reason, great way to mismanage your current cash.Staying your collection as important as timely delivery of your products. Enabling customers consistently pay late to teach them it important for you to pay on time. Be sure to have a consistent system in place to collect payments from your customers and help them keep current with you.
Mistake # 5 - Payments to vendors too earlyYou're intention is to foster a good relationship with your vendors, but only the initial time to pay vendors when you receive a discount for early payment. Even then, you have to weigh the pros and cons of whether or not the discount is worth giving up your cash faster than you need. Keep a constant balance of cash while paying your bills on time will have long-term benefits for your company, especially as you grow your business.
Mistake # 6 - stocking over inventory and suppliesIncremental bulk order savings lose their value when inventory is on the shelf and the money Cash is not available for other efforts. In other words, do you think you are saving your per piece price and increase your gross income. However, you have cash tied and unable to act quickly opportunities.You need to consider whether the small savings of buying in bulk is worth the amount of time inventory is on the shelf. Inventory does not earn interest, but in general only lose more value time.
Mistake # 7 - Not Controlling Payroll costsIt easier to allow the days grow longer and longer and slowly crept salary. Way to increased salary costs include the lack of planning and lack of direction. How long does it take your team to refocus each time a new fire broke out? A customer calls about the final sequence where all the demonstrations to make the customer happy is more expensive than planning a work schedule and sticking to it. Set standards and have a "standard" for how long a task should take to help keep your costs Payroll consistent.Are still nodding your head as you realize that you made some mistakes yourself? Do you make other mistakes that I have not covered here?
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