Poor cashflow is a constant headache for most business owners. In my conversations with business owners a common theme emerging is the day-to-day struggle of chasing outstanding payments and juggling creditors who themselves are pressing for payment.
Whilst you may be doing everything you can to encourage debtors to pay what do you do if your creditors are putting equal if not more pressure on you to pay up and your bank won’t help?
Here are four steps you can take.
Step 1: Assess Where You Are Now
If the pressure is on there is a high probability you have lost sight of the extent of your problem. When you are constantly bombarded with phone calls and letters it’s too easy to ignore the situation in the hope it will go away. But this is not the time to bury your head in the sand.
Part of the key to successful cashflow management is knowing exactly where you stand. Forewarned is forearmed.
So your first task is to write down precisely how much you owe and to whom. If your bookkeeping system is set up around stacking invoices in the corner of your office, or leaving them languishing in your email in-box, access them out and list them one by one with names, amounts and dates due.
Acknowledging and accepting the extent of the problem is an essential first step.
Step Two: Prioritise Your Payments
Having written a list of payments due the next step is to prioritise them. In prioritising the list you are aiming to classify them into three categories:
1. Business critical payments which have to be made under any circumstances. These are payments which would put your business at risk if not processed
2. Creditors who would be content with a part payment
3. Non-critical creditors who could wait and not cause you major disruption if not paid
Step Three: Communicate, Communicate, Communicate
In times of a cash-crunch it’s too easy to ignore the situation you’re in but in not communicating you will only compound the problem. Now you have your list the next step is to get in touch and inform each of them as to what is happening and to communicate your message or request.
Put yourself in your creditor’s shoes; what would you think if you were expecting payments by a certain date and had planned your cashflow position accordingly but no payment was received? Not impressed I guess. So why should it be any different if you are the one delaying payment?
By communicating your intentions you will be preserving and in some instances potentially strengthening relationships with your suppliers.
Step Four: Check Your Cash Position Daily
Now you know where you stand you can move ahead more confidently. From now on it’s all about monitoring the cash position in your bank account on a daily basis. You are checking to see who has paid you, what cheques have cleared and, referring to your payment schedule, which creditors you can pay as per the agreements you have made.
Once you have made a payment, follow step three and communicate … call to tell them their payment is on its way.
Continued communication is the key.
Follow these steps and you will be in a better position to handle any cashflow crisis you may be experiencing.
Hi Rob, it was so interesting and entertaining listening to you at the Kevin Green Wealth Coach Workshop in Reading this weekend! I didnt realise you can find Finance proposals such fun!. Brilliant tips! Thanks.
Rob delivered a series of 3 workshops aimed at understanding how finance houses look at finance propositions with the aim for us as a team to deliver more of a bespoke offering to our customer base. The training was delivered to a mixture of staff who work with new businesses start-ups and existing established businesses across Mid & South West Wales. Rob delivered the training with an abundance of passion and has really helped my team look at financial propositions in a different light, many thanks again Rob and I look forward to work with you in the near future.
Further to your recent presentation at LEAD Wales just wanted to say it was very refreshing to see somebody talk passionately and positively about finance, very insightful!
I wanted to thank you for such an insightful, energetic, and entertaining talk at the Kevin Green Wealth event on securing funding and creating a successful plan. It was brilliantly executed and a pleasure to listen to and the ideas I’ve learned are definitely going to help me in going forward.
Rob kindly agreed to attend the recent Pontypridd RFC sponsors networking evening and delivered what can only be described as an excellent talk on 5 Tactics to Boost Your Business and Your Profits. He kept the audience engaged throughout and the feedback from everyone was excellent. Rob is very knowledgeable on business and finance and on top of that is a genuine nice guy. We hope to have him back at a future event and I have no hesitation in recommending Rob’s services.