Turn your Cash Flow Around...Fast

There was a time that I didn't track our cash flow right either, back in my creative agency days. We had money coming in so I spent my time focusing on the more 'important things.' But once the recession finally hit us in early 2009, I realized that, like a lightning strike, cash flow can become THE issue. I started tracking our cash flow and sales pipeline like a hawk tracks dinner.

That's when I realized that I wasn't just watching for a shortfall, but that those numbers told me all kinds of things about my business and how to turn that data into decisions and actions that avoided crisis and made us money. By 2011 we'd nearly doubled our revenue even with the long, painful effects of the recession still weighing heavy on our business.

Here are my top 11 areas where businesses are leaking money and what to do when you find them. In other words, I'm giving you a map to get from here to cash flow nirvana. I doubt you're plagued by all of these issues, but even a single one can be disastrous on your business.

‍1. You're not Forecasting Your Cash Flow

‍• You have only a cursory understanding of where you're headed financially

• You're dramatically increasing risk of a crisis and, at worst, business closure

• Your business is losing money through inefficiencies in your processes

‍Start Forecasting to:

‍• Easily set SMART financial goals that move you in measurable ways to toward risk reduction and business health

• Examine all your business processes and plug where money is leaking out

You're pulled in a billion different directions in your business but you need forecasts. It's both an Urgent and Important task, which means that forecasting your cash flow is high-priority. It results in the biggest return on your time and money investment.

‍Forecasting allows you to solve small problems...before they become costly business crises. Forecasting will literally save your business at some point all because you make the time once or twice a week to have a coffee date with your numbers.

‍2. You Have a Single Line of Sight

‍• Your lack of scenario planning and 'what ifs' lead to tunnel vision• You're not stress testing decisions

• Your direction and decisions are uninformed and come back to bite you

‍Start Forecasting to:

‍• Plan different speculative scenarios from your data and your imagination

• Visualize how internal and external events will influence your financials over time and track how present decisions will affect the future

• Gain direction; decisions are proactive - not reactive

Experienced business people don't rely solely on their intuition to make business decisions. They know that just like everyone else, they're vulnerable to 'confirmation biases' which tell them they have a great track-record of trusting their instincts...because they've forgotten all the times that their instincts have led them astray.

‍Even when an action plan is successful, its important to be able to objectively check if it was the best decision, if money was left on the table or if an opportunity to grow was stifled.

‍Savvy business people also know that poor decisions are not the simply the 'cost of doing business,' but rather, 'the cost of sloppy or hurried forecasting, evaluation and action'.

‍3. You Don't Know Your Break-Even Point

‍• You run at high risk without a baseline understanding of your costs• You're unable to set goals related to operational realities

• You have difficulty growing

‍Start Forecasting to:

• Become an avid goal-setter when it comes to operational realities

• Develop a deep understanding of the costs of running your business

• Be both open to and prepared for growth opportunities

Although expenses will change from month to month because costs vary for your materials, labor and market factors, you will still able to make an educated guess as to whether you're breaking even or not. You'll also get dialled in to the monthly figures and come to know at which point in the month your business starts paying for itself. You'll be empowered to decide what's to include in your baseline compared to what you consider to be a variable expense.

‍4. You Aren't Creating Revenue Goals

‍• You don't plan for growth but just hope it happens

• You lack a sales process that targets your needs• You only plan for the very near-term

‍Start Forecasting to:

‍• Bring your growth ideas from imagination to reality

• Dial in your sales process to target your needs• Build your plan to progress logically to goals today, next week, this quarter and this year

Often, entrepreneurs feel like they can barely drag through the day...let alone the month or into the new year - totally understandable and a really common experience. To have your business reach the next stage of its cycle means you need to get accustomed to managing your cash flow on a regular and proactive basis. The rewards are optimizing your growth and an increasing feeling of control and mastery over your business and events that might influence it.Establishing logical goals and tuning them regularly makes the hundreds of decisions you need to make every day much easier. In fact, you'll start to notice that it's only when the decisions start to pile up through inertia or analysis paralysis that you won't feel agile enough to continue.

‍5. You Aren't Tracking Your Profit Margin

‍• You focus on the total value or revenue of a sale but are unclear on the profit margin

• Your sales lacks clarity in what products or services are the most profitable

• Your sales team estimates to low or offers discounts that could put a deal in the red

‍Start Forecasting to:

‍• Understand the relationship between revenue and profit margin

• Help your sales team discover which products and services are the most profitable

• Make sales deals that keep you in the black

Unlike businesses that make assumptions that profit is naturally occurring, you'll learn where the profit is present in markup, materials, and labor - you'll have your thumb on the pulse of how budgeted labor hours can eat into profit without careful time tracking.

‍Even if something seems right, it might still be skewed - you'll have the tools ready to invest your time to decode all of the costs that go into your offerings in order to plug the leaks where your profit drains away. With more money in your pocket, those profits will trickle back through the whole business.Here's a refresher on gross and net profit margins to get you started.

‍6. You Lack Revenue/Sales Forecasts

‍• You lack the step between goals and the reality or exceeding them

• You don't have a sales process that will help you reach your goals

• You lack long-term planning and a pragmatic approach to growth

‍Start Forecasting to:

‍• Know your goals and priorities, and the actions you should take to achieve them

• Ensure your sales process helps you get to your goals

• Use "Growth" to mean "A multi-part, highly actionable, well-documented plan

"You'll no longer be at the mercy of the 'Sales Gods' that might make it rain on your business....or keep you in drought. You're on your way to mastering your revenue destiny and leave little to luck, chance or 'unknown factors'. You'll never be able to predict everything, but hazarding a guess will come more easily with your figures in hand.

You'll be better equipped shine a spotlight on your business from time to time to see where the cracks are between ownership, operations and sales with the intent of building more profit and a stronger team through good morale and honest, professional communication.

‍7. You Experience Severe Highs and Lows in Your Sales

‍• You experience bumpy, unpredictable cash flow

• You find it difficult to plan and manage growth

• It's tough to identify trends and smooth out the growing pains

‍Start Forecasting to:

‍• Help your cash trend evenly

• Developing a good eye for spotting trends and soothing growing pains

‍Your list of potential deals, their likelihood of their success, and their timing are all insights that you'll have at your fingertips. You'll be able to keep 'em coming and keep 'em closing at a good pace so that you remain poised to grow. This is possible because you've got a detailed forecast that you check every few days and you know how key it is to your profitability. Having a view of what's coming allows you to compensate for and ride out any peaks or troughs that your business experiences.

‍8. You Suffer from Capacity Issues

‍• Leading to capacity issues and increased cost

• Outsourcing/contracting

• Loss of Billable Time

‍Start Forecasting to:

‍• Ensure workers are at work working effectively

• Minimize outsourcing or contracting

• Track billable time vs admin time

In most businesses, the internal team is responsible for generating billable hours and income. They rely on a smooth pipeline to be able to manage over or under capacity issues on a regular basis.

Your team will become an efficiently working machine with little 'down' time, regardless of the industry - which means that all billable hours are accounted for. You'll be able to predict and manage times where you're likely to exceed capacity and work to juggle project timing proactively so as to avoid paying overtime and contractors that will be able to help you meet your workload but who's extra expenses will eat into your profit margin.

You'll want to look down your sales pipeline on the regular because you know that it buys you time and options. You'll be able to then coach your team to drive quick turnaround sales to backfill slow periods and manage staff's administrative needs when work is under capacity. You'll be able to negotiate a tight but organized schedule of start and delivery dates while turning down jobs that aren't as profitable to manage your busy times. When you tune into your data on the reg, you're much more likely to view both problems and options.

‍9. You Fail to Identify a Crisis Before it Hits

‍• You fail to see a cash flow crunch even when it's right on top of you

• You're unable to prepare for the unexpected and costs pile up

• Crisis appears as a nasty surprise with a lack of time or capital to react

‍Start Forecasting to:

‍• See potential cash flow crunches coming from a mile away

• Prepare for the unexpected and keep on top of costs

• Keep crises at threat level 'Yellow' rather than threat level 'Red'

You could fall prey to telling yourself stories about successes...or lack of. "Bad luck... again. It's the cost of doing business. Why me?" Instead of looking back over past errors and justifying them as the price of doing business, you work to proactively manage small problems ahead of time...before they become big ones.If it turns out that the 'Code Yellow' is in fact a 'Code Red', then timing is everything.

‍Luckily, checking in on your cash flow means that you'll be ready to call in your banker or investor(s) to help you secure funding. You know your chances of attaining a loan improve when you're able to say, "My data show that we're predicting a shortfall caused by a sales trough in six weeks - with X for cash flow and Y in the sales pipeline, my expectation is that temporary funding will help us bridge a gap in our yearlong plan.

‍10. You Don't Act on the Data

‍• You don't do collections for late payments

• Your not keeping bank/stakeholders up to speed

• You miss out on opportunities because you don't have capital on hand

‍Start Forecasting to:

‍• Engage your collection procedures regularly as late payments occur

• Look forward to speaking on the reg with your bank - ask them questions for a change!

• Go looking for opportunities because you're cash flow positive

Do you limp along or experience seasons of revved up growth? ‍

Making time to proactively evaluate, plan and commit to action action based on your data will keep you moving in the right direction.

‍When times are good and you're working at capacity, it's easy to enjoy the ride - it's so easy to get complacent but the risk versus reward of taking a few minutes a week to stay on top of your forecasts can take away the regret when you get lax and let something slip by.

‍11. You Don't Keep Your Data Up-to-Date

‍• Consistency is key - you're hit or miss with checking in on your numbers

• Forecasting always feels like a huge effort to update

• Your plan seems outmoded because it's out of date

‍Stay Forecasting to:• Stay consistent in your business

• Exert far less effort in 'maintenance and growth' phase than you did in 'triage' phase - that's a reward in itself!

• Benefit every day by having your plan at your finger tips

It's so obvious that it almost goes without saying, but you know your data is only useful if its up-to-date - which means you access it regularly - which means that you made time in your weekly schedule along with other critical tasks. With today's cloud tools and connected systems, keeping on top of everything gets easier every year. Learn about our newest features and integrations here.

__

Forecast Your Cash Flow, Revenue and Profit in the Ultimate Scenario-Modelling Tool to gain confidence, clarity and insight into your business.

Dryrun ties automation with unmatched flexibility delivering clear, powerful and accurate forecasts in a fraction of the time spent in spreadsheets.

Book your DISCOVERY CALL to learn about the Dryrun advantage or start your FREE TRIAL today!

Dryrun - A better way to run the numbers.

‍