Cashflow - Get Over The Anxiety

Cashflow in small business is often a source of unnecessary anxiety and this anxiety will directly affect your performance and desire to charge ahead. The secret is to take control.

After all money is only another tool, another resource that helps you to get what you want. Just like your other resources it has to be managed and you have to take control. In my first business as a self employed Electrician I had no idea about cashflow... Well that's what Accountant's are for, right? Wrong, usually the Accountant's involvement in a small business is to complete the tax return at the end of the financial year. You as the business owner have to manage the day to day cashflow, and looking at your bank statement balance online is not going to work, infact it will add to the problem.

Knowing your cashflow means taking control and enjoying a calm state of mind. A calm state of mind results in performance at your best potential. Take a little time (1 hour once a week) to update your cashflow schedule and I guarantee you will feel calmer and less stressed about money. You will gain clarity about what you need to do. It will show you what money needs to be collected by when, what extra sales you need to make, what jobs you have to get finished and invoiced, so you can pay your suppliers at the end of the month. And then you'll build on that and start forecasting what your cashflow potential should be in 12 months, 24 months, etc. That's when it gets exciting, because your cashflow schedule becomes a valuable tool in designing your future goals... More on that later.

What's that you mumbled... "not another thing to fit into my busy day... I don't know how to create a cashflow schedule, I have no idea where to start, and anyway I'm using an accounting package!!" Well the accounting package is useless because that's only looking at your history. How much time are you wasting look at that pile of bills in the shoe box, trying to sort them, or looking at your bank statement and thinking where's all the money going and the waste of time worrying and stressing. 1 hour a week will allow you to focus, to take control, to plan.

What's a cashflow schedule? A simple spreadsheet on a bit of paper or on the computer that identifies all of your income, all of your expenses, with a profit result at the bottom. Our cashflow segment of the free mini course at www.profitfitness.com provides a template for this. A cashflow schedule is simple and imperative for small business. Every week you would enter any bills that need to paid, at the date that they need to be paid, and any income expected at the date expected. Very quickly, by looking at the net result (income less expenses) you can identify any weeks in the future that you may have a negative result. So weeks before you already know about a problem and can put something in place to correct it... Make more sales, take out a loan, etc. Also, if you ever need a loan from a bank this tool is brilliant to show them as it'll show expected profits and most importantly demonstrates that you are in full control.

Most small businesses struggle with sporadic income, mainly because they haven't yet learned how to maintain customer loyalty, or don't have a good ongoing customer retention program in place. More of this in our mini course. Sporadic income is very hard to predict on the cashflow schedule and usually ends up being inflated to make the net result look good. A good cashflow schedule should show a consistent income week after week that is steadily rising. Which leads onto a valid reason why you need to identify your target market, make an offer that pulls customers away from your competition and then lock them into an ongoing loyalty program, so you know exactly what your income will be for the next 12 months. Also you have just massively boosted the value of your small business.

Consider this... 2 different, single operator, mobile car detailing businesses for sale. The 1st operator has been operating for 3 years and waits for clients to ring. The 2nd operator has been operating for 1 year, he has 60 clients, they are all on a 12 month loyalty plan, all his clients receive a discounted weekly car detail and the detail is completed at the same time and day once a week. Which one would you buy?

The 2nd operator has guaranteed his income for the next 12 months. If his service is impeccable do you think his customers will renew the program for another 12 months? He has created a win win solution, the customer wins with a better price and knowing exactly when the detailer will arrive so they plan their day around that. The detailer has won because his business is worth at least double what his competitors business is. How easy would it be to loan money from the bank, for another vehicle and detailer, based on this cashflow?

Your cashflow schedule will help you to make informed decisions and give you peace of mind. Make a note in your diary now, block out 1 hour the same time every week to update your cash flow. Make it an important priority. Make it a habit, you will be thankful you did.