7 Cash Flow Secrets Your Accountant Never Told You
By Caroline Jordan
Looking for ways to boost your cash flow?
As a small business consultant, I make
these recommendations to my cash
strapped small business clients:
1. Shoeboxes are for shoes, not business records.
Pardon my candor but, you will never have a successful business if you don’t
systematically track your income and expenses, who owes you money, and who you
owe money to. This is absolutely crucial. You don’t have to have a big expensive
computerized system, although a computer program like QuickBooks certainly does a
beautiful job. You can keep track of everything with a pencil and paper if you like.
But, you’ve got to track basic information in a systematic manner. Without this vital
information your business cannot flourish and your cash flow will always keep you
up at night.
2. Getting your customers to “show you the money.”
The best way to get your customers to pay what is owed is to remove every possible
excuse for nonpayment. Don’t extend credit unless it’s absolutely necessary. Establish
credit policies to help determine who will get credit. Get an invoice into the bill payer’
s hand as quickly as possible after the work is done or the product is delivered. Don’t
be afraid to send a letter or statement or make a phone call reminding your customer
his bill is due. Never be rude. Always be firm. Focus on preserving the relationship. If
a customer has a legitimate gripe about your business do whatever you can to fix the
problem.
3. Budget is not a four letter word.
Repeat after me, “Budgets are our friends.” Seriously! A budget is a plan. It helps you
stay focused on what you need to achieve. For example, you can use your budget to
help you achieve sales goals, determine how much you need to spend on advertising,
how much you’ll need for materials, and if you can afford to pay overtime. Having a
budget for your business is the difference between piloting a plane with instruments
or flying blind in a fog.
4. A customer in the hand is worth two in the bush.
My very first customer is still with me. Over the life time of our relationship, she will
be worth at least tens of thousands of dollars. Actually, she’s worth far more than that
because she refers business to me regularly. It’s easy to get caught up in the search for
new customers. But, never forget the ones you already have. What other services or
products can you offer to them? How can you get them to refer their friends and
colleagues to you? You can build a successful business around a small number of
customers by providing them with excellent customer care and a range of solutions.
Loyal customers are money in the bank, they’re easier to work with, and it’s less
expensive to keep them happy than it is to find new customers.
5. The most powerful number in your business.
If you know only one number in your business it ought to be your Breakeven Point.
Your breakeven point is the moment in time when your income equals your expenses.
If your income is higher than your expenses, you have a profit. If your expenses are
higher than your income you have a loss.
Why is this such a critical number? First of all, to find your breakeven point you need
to know what all of your expenses are. How much does it cost you to produce your
product or deliver your service? That includes how much you need to pay yourself. If
your business isn’t able to support you, you’re not breaking even. Once you have your
total expenses, you have a place to start. What do you need to do to achieve a level of
sales high enough to cover your expenses? How many customers do you need to
serve? How many products do you need to sell? If you can’t reach that income level,
what can you do to cut your expenses?
Your whole business plan can flow from that one number. You can use your break
even point as a powerful business tool to make decisions about marketing, strategy,
plans for expansion, hiring a new employee, etc.
6. How to make friends and influence check cutters.
Once upon a time, I worked for a corporation—yes, me, the quintessential
entrepreneur. One of my jobs was working in Accounts Payable. All day long I got
calls from vendors. Not friendly social calls, mind you. Angry calls. Irritable calls.
Annoying calls. Vicious calls.
And then there were the friendly vendors. The ones who took a moment to treat me
like a human being. Guess who I knocked myself out for? Guess whose checks made it
through the labyrinth of bureaucracy and out the door? Uh huh. The vendors who
treated me with respect. Is that fair? Not at all. But, it is human nature.
Take the time to get to know the folks that cut the checks. Don’t be afraid to build
bridges and establish relationships. You meet lots of interesting people and your cash
flow will improve. One of my friendly vendors hired me away from the Cubicle City. I
spent the next three years improving his cash flow from the other side. You just never
know.
7. Why paying taxes is a cause for rejoicing.
The strategic approach of many small business owners is to have as little profit as
possible at the end of the year. Otherwise, you’ll have to pay taxes. So year after year,
small business owners make decisions in their businesses based on intentional lack of
profitability.
Now, for the majority of small business owners, what the IRS considers to be profit is
in actuality your paycheck. Are you working to lower your paycheck? Would you put
up with that from an employer? By putting up with it from your own business, you
condemn yourself to a life of poverty just to avoid having to pay taxes.
I won’t tell you that writing checks to the IRS is my favorite thing to do and I make
sure I take every legal deduction I can, but if I’m paying taxes, it means I’m making
money. I like making money. The bottom line is this: If you’re paying taxes, it
means your business is making money. Go out and make more! Don’t let the thought
of taxes hold you back. Think about it this way, even if you’re paying fifty cents of
every dollar to the government, that’s fifty cents more in your own pocket. That’s a
good thing!
A word of caution: don’t boost your earnings and spend it all. Make sure you plan
ahead for the tax bill!
About the author: Caroline Jordan, MBA, is a veteran small business owner, accountant,
consultant, trainer, and author. She is the owner of The Jordan Result, a company specializing in
developing real world, practical resources to help small business owners improve cash flow and
business operations. Jordan is also an accounting and business professor and the author of “Stop
the Cash Flow Roller Coaster, I Want to Get Off!” For more tips and strategies to build your
business visit The Jordan Result.
By Caroline Jordan
Looking for ways to boost your cash flow?
As a small business consultant, I make
these recommendations to my cash
strapped small business clients:
1. Shoeboxes are for shoes, not business records.
Pardon my candor but, you will never have a successful business if you don’t
systematically track your income and expenses, who owes you money, and who you
owe money to. This is absolutely crucial. You don’t have to have a big expensive
computerized system, although a computer program like QuickBooks certainly does a
beautiful job. You can keep track of everything with a pencil and paper if you like.
But, you’ve got to track basic information in a systematic manner. Without this vital
information your business cannot flourish and your cash flow will always keep you
up at night.
2. Getting your customers to “show you the money.”
The best way to get your customers to pay what is owed is to remove every possible
excuse for nonpayment. Don’t extend credit unless it’s absolutely necessary. Establish
credit policies to help determine who will get credit. Get an invoice into the bill payer’
s hand as quickly as possible after the work is done or the product is delivered. Don’t
be afraid to send a letter or statement or make a phone call reminding your customer
his bill is due. Never be rude. Always be firm. Focus on preserving the relationship. If
a customer has a legitimate gripe about your business do whatever you can to fix the
problem.
3. Budget is not a four letter word.
Repeat after me, “Budgets are our friends.” Seriously! A budget is a plan. It helps you
stay focused on what you need to achieve. For example, you can use your budget to
help you achieve sales goals, determine how much you need to spend on advertising,
how much you’ll need for materials, and if you can afford to pay overtime. Having a
budget for your business is the difference between piloting a plane with instruments
or flying blind in a fog.
4. A customer in the hand is worth two in the bush.
My very first customer is still with me. Over the life time of our relationship, she will
be worth at least tens of thousands of dollars. Actually, she’s worth far more than that
because she refers business to me regularly. It’s easy to get caught up in the search for
new customers. But, never forget the ones you already have. What other services or
products can you offer to them? How can you get them to refer their friends and
colleagues to you? You can build a successful business around a small number of
customers by providing them with excellent customer care and a range of solutions.
Loyal customers are money in the bank, they’re easier to work with, and it’s less
expensive to keep them happy than it is to find new customers.
5. The most powerful number in your business.
If you know only one number in your business it ought to be your Breakeven Point.
Your breakeven point is the moment in time when your income equals your expenses.
If your income is higher than your expenses, you have a profit. If your expenses are
higher than your income you have a loss.
Why is this such a critical number? First of all, to find your breakeven point you need
to know what all of your expenses are. How much does it cost you to produce your
product or deliver your service? That includes how much you need to pay yourself. If
your business isn’t able to support you, you’re not breaking even. Once you have your
total expenses, you have a place to start. What do you need to do to achieve a level of
sales high enough to cover your expenses? How many customers do you need to
serve? How many products do you need to sell? If you can’t reach that income level,
what can you do to cut your expenses?
Your whole business plan can flow from that one number. You can use your break
even point as a powerful business tool to make decisions about marketing, strategy,
plans for expansion, hiring a new employee, etc.
6. How to make friends and influence check cutters.
Once upon a time, I worked for a corporation—yes, me, the quintessential
entrepreneur. One of my jobs was working in Accounts Payable. All day long I got
calls from vendors. Not friendly social calls, mind you. Angry calls. Irritable calls.
Annoying calls. Vicious calls.
And then there were the friendly vendors. The ones who took a moment to treat me
like a human being. Guess who I knocked myself out for? Guess whose checks made it
through the labyrinth of bureaucracy and out the door? Uh huh. The vendors who
treated me with respect. Is that fair? Not at all. But, it is human nature.
Take the time to get to know the folks that cut the checks. Don’t be afraid to build
bridges and establish relationships. You meet lots of interesting people and your cash
flow will improve. One of my friendly vendors hired me away from the Cubicle City. I
spent the next three years improving his cash flow from the other side. You just never
know.
7. Why paying taxes is a cause for rejoicing.
The strategic approach of many small business owners is to have as little profit as
possible at the end of the year. Otherwise, you’ll have to pay taxes. So year after year,
small business owners make decisions in their businesses based on intentional lack of
profitability.
Now, for the majority of small business owners, what the IRS considers to be profit is
in actuality your paycheck. Are you working to lower your paycheck? Would you put
up with that from an employer? By putting up with it from your own business, you
condemn yourself to a life of poverty just to avoid having to pay taxes.
I won’t tell you that writing checks to the IRS is my favorite thing to do and I make
sure I take every legal deduction I can, but if I’m paying taxes, it means I’m making
money. I like making money. The bottom line is this: If you’re paying taxes, it
means your business is making money. Go out and make more! Don’t let the thought
of taxes hold you back. Think about it this way, even if you’re paying fifty cents of
every dollar to the government, that’s fifty cents more in your own pocket. That’s a
good thing!
A word of caution: don’t boost your earnings and spend it all. Make sure you plan
ahead for the tax bill!
About the author: Caroline Jordan, MBA, is a veteran small business owner, accountant,
consultant, trainer, and author. She is the owner of The Jordan Result, a company specializing in
developing real world, practical resources to help small business owners improve cash flow and
business operations. Jordan is also an accounting and business professor and the author of “Stop
the Cash Flow Roller Coaster, I Want to Get Off!” For more tips and strategies to build your
business visit The Jordan Result.
Home Office Weekly is a BackPorch Publishing site Click Here to Get Your FREE SUBSCRIPTION Today! Marcia Passos Duffy, Publisher & Editor Author of Be Your Own Boss 301 Moved Permanently |
|
| home | business tips| office space | time tips| home life|inspiration |art|books|tools|site map|about us |
|
