Hold on to Cash – Fuel Your Growth
You know your business requires cash, and growing your business requires even more. Your challenge is to strike the proper balance between consuming money and generating it. Failure to strike that balance often results in having an even thriving company finding itself out of business—a victim of its success.
Think before committing your cash:
Are you budgeting your expenses?
- Is your spending consistent with planned revenues?
- Are the potential expenses mission-critical?
- Do the expenses you are considering support customer acquisition?
- What would be the negative impact on your business if you waited?
- Have you researched these items to know you are getting the “best price?”
- Are you able to negotiate payments over time rather than spending “all at once?”
- What would be the result if you spent these monies on your cash position?
- How long would it take for you to return to a favorable cash position?
Are you monitoring your customer payments?
- Have you verified your customers’ credit to be paid on time?
- Did you set a limit on how much product your customers may have so customers do not exceed their ability to pay?
- Who is not paying on time?
- What steps have you taken to collect your outstanding balances?
- Are you sending your invoices electronically so that invoices with the date due are received immediately after delivery of services/products?
Are you paying vendors only when due?
- Which of your vendors offer discounts for early payments?
- Are you keeping your cash balance high while still paying your bills on time?
Are you following the “Just in Time” methodology for inventory or supplies?
- Is there an analysis between projected sales and inventory/supplies requirements?
- Are you negotiating contracts according to your needs rather than “bulk” discounts?
- Do you know if you can reduce your inventory investment and still deliver on time?
- Have you diversified your suppliers to avoid delivery delays?
- Do you perform a quarterly review of suppliers’ on-time performance?
Are your offerings priced for profitability?
- Are you aware of how your products/services are priced compared to your competition?
- Have you surveyed your customers to determine how vital pricing is in choosing your business offerings?
- Are you monitoring price changes across your industry?
Are you controlling payroll costs?
- Are your staffing levels based on projected sales?
- Do you have an outsourcing plan before committing to hiring?
- Are you reviewing work schedules to confirm an appropriate work-life balance for your employees?
- If your business is seasonal, have you planned for those higher levels without growing your permanent employees?
Are you realistic in projecting sales?
- Are you checking your profit margins for each product/service bi-monthly?
- Do you have metrics to know where you can improve your profits?
- Are you working with more than one scenario for sales projections to confirm your realism?
- What does it cost you to acquire each customer?
- Are you using the most cost-effect channels for customer acquisition?
Are you actively managing your cash?
- Do you know how much money is coming into and out of your business each week?
- Are you aware of when your organization is projected to have a negative cash position?
- Do you have solutions to resolve these projected deficiencies?
- Have you approached your bank for lines of credit, loans, and credit cards?
- Are you managing your business using a detailed budget?
- Do you have a 90-day budget that correlates to your cash projections?
Are you reinvesting your profits?
- Is a cash reserve being built to “cushion” your business for when the unexpected occurs?
- Are you reinvesting funds towards improvements that would grow your company for critical equipment or technology?
- Have you determined what percentage of your profits should be set aside every month for your reinvestment?
- Do you know where every penny earned or spent is going?
Are you paying yourself?
- What methodology are you using to calculate your salary as your business grows?
- How about 5 cents of every dollar of sales for a salary to start paying yourself from the beginning?
There are plenty of challenges that come along with business ownership. Charting your growth and success makes your efforts worth it. We are alerting you to pitfalls that we wish you to avoid.
Fortunately, awareness is the first step to effectively overseeing your business. Keep an eye out for these traps. Ensure you are not spending or borrowing too much or failing to monitor how your long-term plan is performing. In this environment – 90-day sprints will serve you well.
→ #accucompvirtual CFO Team is accountable for delivering timely and accurate financial information.
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