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One simple strategy when customers won’t pay you

By on October 21, 2010 in Cashflow

Many business owners have experienced the disappointment of supplying products and services and then not being paid. Not only is it frustrating, but very painful financially.

So what’s one simple thing that you can do to alleviate this situation?

Do a deal with the customer to pay you small amounts on a regular basis.

This is what the tax department will do with you,
This is what a bank will do with you and
It is exactly the same strategy you can use with your customers who are finding it difficult to pay.

If they completely stone wall you by avoiding paying anything the outstanding account sits around ‘like a bad smell’.

If you can get a small amount being paid regularly it is amazing how over time the amount diminishes and you get your money back.

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One simple reason why you feel as though you’re sinking in your business

By on October 14, 2010 in Cashflow

When was the last time that you increased the prices in your business?

Here’s a simple example showing clearly what happens when you fail to get a price increase in your business.

Sales $100
Product Cost $ 50
Wages Cost $ 30

Margin $ 20

Let’s assume that inflation is running at 3% so the product costs rise by 3% and the wages rise at 4% and adjust the figures to take this is account.

The new figures will be

Sales $100
Product Cost $ 51.50
Wages Cost $ 31.20

Margin $ 17.30

This means that in one year, the margin in this business has fallen by $2.70 or 13.5% and the only way to make this up is with more volume.

This road is a very tough road because you make less out of more sales which gets very stressful and you feel as though you’re swimming hard to keep your head above water!!

Do you have an experience in this that you would like to share?

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How to avoid your business being shut down in a cash flow crisis

By on September 30, 2010 in Cashflow

Have you ever run out of money in your business and still had bills to pay?

This seems to be a very common problem for business owners when the timing of money coming in and money going out doesn’t seem to match.

When this happens most business owners do one of two things.

  1. Tip in money of their own to solve the situation
  2. Ring all their customers and ask for money

BUT there is actually a more important thing to do if you’re in a product style business.

Ring your suppliers!

Let them know that you have a cash flow issue. Don’t wait for them to ring you because by then you will have lost some goodwill with them.

Keeping your supply lines open is critical because without them you may as well shut the doors and give up.

If you’re to keep trading you must keep your trade accounts open because your business can produce the money to trade its way out.

That’s the least painful way out of a cash flow crisis!!

What’s your experience on this?

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3 easy steps to decrease debt in your business

By on September 16, 2010 in Cashflow

Many people get into debt in their business before they even open the doors and then it becomes a long hard struggle to recover and become successful.

My three easy steps will ensure that you start off correctly and then continue to accumulate strong cash flow and therefore decrease any debt you have in your business.

The three easy steps are:

  1. Make sure you have sufficient equity in your business before you start

    This means that you need to be putting in some CASH of your own and avoid starting your business with a loan from the bank as the only money to start with.

    It is much easier to continue working a job and save some equity so that you’re not overwhelmed from day one of your business by too much debt.

  2. Make sure you make profit AFTER tax

    If you are trying to avoid paying tax at the same time as growing your business you run the risk of making no profit and then the growth in your business must be funded by an increase in debt.

    Ensure you make good profit AFTER paying yourself a market wage AND paying the correct amount of tax

  3. Make sure you get paid by your customers

    Many small business owners make reasonable profit by selling to large businesses that have long payment terms.

    Others simply sell to small businesses that can’t pay because they’re not making profit.

    In both of these cases you will find that the accounts receivable can grow quite quickly and this again will need to be funded by more debt.

    Negotiating good terms and then getting your customers to stick to those terms is key to decreasing the debt in your business

What’s your story regarding debt in your business?

Have you been caught owing a lot of money and been stressed as a result?

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Do you feel like a PUSHMI-PULLYU

By on June 16, 2009 in Cashflow

In the famous stories of Doctor Dolittle there was a strange animal called a PUSHMI-PULLYU. They had no tail but a head at each end and were very difficult to catch or sneak up on.

Made me think about how profit and cash flow push and pull against each other in a business.

  • One month the profit seems to be great but there is no cash.
  • Next month the profit falls away but there is cash in the bank.
  • The struggle is getting both profit and cash flow working together and heading in the same direction.

If you relate to this challenge in your business you will understand how the ‘pushmi-pullyu’ must have felt all the time!!

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