I think cash flow is wildly underestimated in business. Often it’s overlooked, or completely forgotten about. Cash flow is like the bilge of a boat, the part underwater that no-one sees, and yet, it’s the only thing keeping it afloat. But it is the It has the capacity to make or break a business.
So, why improve cash flow? It’s an important balance of incomings and outgoings. If outgoings suddenly spike or incomings dry up, then you’ll be facing a difficult situation. Cash flow has blindsided even the most successful businesses. So having a strong understanding of it will place you in a a position to endure tough times. Here are 8 ways to improve cash flow.
1. LOOK AT DEBTORS AND CREDITORS.
Most people who own a small business won’t spend any time looking at their financials or debtors and creditors list (the people who owe you money). Looking at invoices is different from looking at a report. I’m referring to proactively and regularly – weekly or monthly – making an adjustment. If you’re serious about making more money, you need to look at your debtors and creditors list. This can improve your cash flow. You can then reinvest into marketing, product and staff.
2. ALWAYS REINVEST BACK INTO THE BUSINESS.
Reinvest more than you think you can back into the business, because the business will give you return. If you start paying yourself more, it will not give you return. I have invested in everything – property, stock, bonds – but investing and growing a business is the best return you can get. There would be very few businesses that don’t need more investment. When your business is continually growing and taking market share, it can’t get into financial trouble. You could be looking at your competitors and taking their best two team members – that’s a growth mindset.
3. REVIEW YOUR DATA.
Evaluate your marketing metrics on a weekly basis. As marketers it’s super important to review your data – you wouldn’t design a new marketing strategy without looking at those metrics.
4. CREATE A CASH FLOW FORECAST.
You wouldn’t design a financial plan without looking at your current cash flow data.
5. ALWAYS BE IN GROWTH MODE.
60% of all new businesses fail within three years. A sole trader is far more likely to fail at business with an annual turnover of under 200k per year – the rate of survival is only 20%. To run a sustainable business, you need to have an annual turnover of more than $2 million and you should be aiming to have five or more staff members. Knowing this changes everything. Your goals quickly shift, and you begin to ask, “How quickly can we get to 2 million annual turnover and five staff?“
6. SET BIGGER GOALS.
Don’t set SMART (Specific, Measurable, Attainable, Relevant and Time-bound) goals; set a goal in which you know your business will survive.
7. BUILD A TEAM.
Every six months you’ll want to be taking on another staff member. This builds a moat around your business.
8. BE DISCIPLINED.
Every idea is a brilliant idea – if you know what to do with it. Even if you have a great idea, that’s only 10% of the game. A business is 10% idea, 90% execution. Mindset and discipline – that’s what it takes to make a great business.
“If most of you can cook a better burger than McDonald’s, why does McDondald’s make more money than you? The answer is obvious: McDonald’s is excellent at business systems.” ~ Robert Kiyosaki. Let us show you how to improve cash flow with a better business system.