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Rick Smith, Managing Director at Forbes Burton, an insolvency and business rescue specialist, outlines some steps you can take to claw back at least a little of that time and stress.
As a small business, especially one with a family can be a tough ask. Finding that boundary of family time and work can be a challenge but lately, there’s a lot more strains in the world that are putting even more pressure on that balance. Here’s how to manage some of them.
If your business relies on sales, particularly those involving cash payments then increasing this is essential. Use promotion if you can, be that marketing or offers to tempt both new and existing customers.
It’s a really good idea to get in there and observe what sells best, then maximise on that potential. It’s also good to look at the possibility of selling at a higher price point. Are your prices too low? Are you knowingly underselling your service or products?
To make cash flow more freeing, you can also seek deposits or multiple stage payments to spread costs and keep afloat. A lot of businesses make plenty of sales, but are dragged under by bills.
Invoicing promptly is also essential, after all what is the point of making sales if you don’t get paid? To ensure your cash flow stays healthy, also be sure to chase non-payments, adding in late payment charges or fees where possible.
It’s simple really, tightening your belt doesn’t just start with your direct costs, look at indirect costs. Are materials or shipping costing you too much? Could you use different supply chains to save on the day to day running of your business?
It may seem unusual, but starting negotiations to extend credit from suppliers can work wonders for a business. Having time to meet invoices and to receive your own means you can be more agile and are not caught out.
As part of your negotiations, ask for discounts or allowances when you are able to make prompt payments. This can mean you can choose to pay early and will be rewarded for it. The supplier gets their due whatever the situation and you are given much-needed liquidity.
Stuck with obsolete or excess stock? It’s time to get rid and reinvest, old stock that is past its date is dead stock, remaining en vogue is essential for any kind of business.
It’s one thing to be organised, but putting off projects which cannot achieve acceptable cash returns in a decent time frame is something a lot of small businesses simply don’t do.
Use reports and forecasts to understand your own business better. Are you where you thought you’d be this month? How about where you thought you would be a year ago? Is it time to rethink? What are your thoughts when it comes to getting that work/life balance we keep hearing so much about? As a working dad, it could well mean you are plunging your time into your work, can any of that time be saved and spent with your family?
Staffing is an issue that many overlook. Is your team trained and performing well? Can you leave them to deal with more of the day to day?
Another way to become efficient is to use alternative financing methods.Leasing for example means you can gain access to the use (but not ownership) of productive assets.
Using cash flow forecasts to predict the cash that will be in the business over the coming months is important because it can highlight any potential shortfalls.
When you are aware of the periods of time in which the company will be short of cash before they happen, additional finances can be sourced before it gets to that point.
It is obvious that avoiding emergency action is preferable, and avoids late payments to company creditors.
Another way to negate poor cash flow is to identify new target markets.
There may be a way to extend your company’s reach within your own market, as well as looking to other markets for additional revenue streams. However, this is often an appropriate long-term fix once your cash flow forecast has been compiled.
This can be something as simple as repurposing current products or services to entirely new markets without having to change the fundamentals of your business. For example, if you are a commercial plumber, is there a way you can also offer domestic services? Could your equipment be high spec enough to make an impact elsewhere? If you specialise in large buildings and plumbing networks, could you make the switch to even larger contracts? It’s all worth considering.