Most businesses fail……not because the business idea was bad …not because they didn’t have enough orders …not necessarily because the business was loss making ….but because the business RAN OUT OF CASH
Cash flow becomes a problem when there’s too big a gap between paying your suppliers and employees and collecting payment from your customers. The solution is proper cash flow management
So take a minute to ask yourself these 10 questions:
1. Do you have an exact handle on your current cash balance?
2. Do you know your cash requirements for the next week/month?
3. Do you assess the creditworthiness of new customers before doing business?
4. Do you agree payment terms and credit limits with customers in advance of accepting an order or commencing a job?
5. Do you get the customer to confirm satisfactory delivery of the product or service?
6. Do you invoice as soon as the goods/service is delivered?
7. Do you start chasing payment as soon as the account becomes due?
8. Do you have a process for dealing with slow paying customers?
9. Do you have a process for managing your creditor payments?
10. Do you have adequate stock control procedures in place?
If you answer mostly NO to these questions, then your business could find itself in trouble, so take time now to address problem areas. Start by knowing what your current cash balance is and then forecast you cash requirements for the coming weeks and months. Ensure your invoices are issued promptly and chase payments as soon as invoices fall due, then work your way through the list until you have a working cash flow management system in place. Watch this space for further help and advice on managing your cash flow….