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In today's world, where distractions outweigh focus, where one's fears can overtake steadfast belief, small business owners can quickly lose their way. How many times have you second guessed the decisions you made 5 minutes ago, no less last week? I believe it's too many times. Now is the time to remember the fundamentals and the small business owner's belief in small business!
To help with this goal we will look at the Three R's: REPORT, RETAIN, And REPEAT: the steps to clear away the noise and focus on profit and cash flow. Yes, the two most important parts of small business: Profit and Cash Flow. What, not revenue? Well, I understand you want to work on revenue, but if you can get your arms around Profit and Cash Flow, Revenue will work into the mix rather well!
Step 1 REPORT: Daily Accurate Financial Information: Every day the small business owner must know exactly what the business is bringing in and what the business spends. Do you know those numbers in your business? Find the tools, computer, paper the tool matters not, the numbers matter most
Know your daily deposits
Know your daily sales
Know your daily expenses
Know your daily payments all the checks you have written as well as which payments have cashed from your business bank account
Once you have daily information you can track your progress by day, by week, by month and see early warning signs of cash flow issues, increases in expenses, slow down of customer payments and decreases in sales, cost of overtime and so much more.
Step 2 RETAIN: Sales do not always equal cash - when you have customers that owe you money, you have sales with no benefit to you. Work to keep as much of your sales dollars today as possible. You may use an incentive for cash sales vs. non-cash sales. Payment terms cost as much money over time as a discount does today but you are less at risk that a customer may not be able to pay tomorrow, if you take the cash now.
Get a merchant account, if you don't use one today credit card sales are also better and less expensive than accounts receivable. Shop around, merchant account companies are offering great deals.
Make collection calls every day, even if your call is before the payment is due. You will remind your customers that you are ready to receive their payments. The squeaky wheel gets the grease!
Step 3 REPEAT: For every cost of your business, be sure to shop that cost every few months. What was a great price for copy paper yesterday could be a high price tomorrow. Every expense, big and small will generate cost reductions and efficiencies if you discuss them with your employees, your partners and your own mind as you work on better ways to do business.
These steps will increase profit and improve cash flow. Be sure that you are collecting you revenue timely and paying your bills no sooner than is customary in your business model. Today you will not win awards for paying your bills early, you will just use your cash sooner rather than later.
Also, be sure to document every item. Your tax planning is critical. By having good documentation you provide your tax advisor with the best tools to keep your business taxes as low as possible!
Stay focused on your business, stay courageous, disciplined and diligent. Those small business owners who are strong in the most difficult times will prosper in good times and in bad. The future is in your hands.
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Diane Dutton is an MBA, CPA, Speaker, Woman's Financial Coach and Career Advisor, Author of "A Woman's Ladder To Success is Paved With Broken Glass Ceilings". and now the newest breakthrough work "The Winning Edge". With 29 years of executive corporate experience, she consults with CEOs of small and mid-size companies as well as speaks accross the country on business finance and helping women break through the glass ceiling of their career. Ms. Dutton is a member of NAWBO, WAN, NAFE, TMA, NSCPA and the AICPA, You can find more at www.businesswomenspeak.com.
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