There’s an old adage about business that “cash is king” and, if that’s so then cash flow is the blood that keeps the heart of the business pumping. Cash flow is one of the most critical components for a small or mid-sized business. Without cash, profits are meaningless. Many a profitable business on paper has ended up in bankruptcy because the amount of cash coming in doesn’t compare with the amount of cash going out. Firms that don’t exercise good cash management may not be able to make the investments needed to compete, or they may have to pay more to borrow money to function. Despite the fact that cash flow is the lifeblood of a business – the fuel that keeps the engine running – most business owners don’t have a handle on their cash flow therefore poor cash-flow management is causing more business failures today than ever before.

Do you find yourself wondering every week whether you’ll make payroll? Is your business flushed with cash one week and starved for cash the next? Are you often surprised by money emergencies? Do your business finances feel out of control? Do you find it hard to plan for the future because you never know if you’ll have cash? If so, your business may be experiencing a case of Roller Coaster Cash Flow-that small business phenomenon that keeps business owners tossing and turning at night wondering how the bills will get paid. If you’re experiencing queasiness of the ups and downs of the Cash Flow Roller Coaster, you’re not alone. If you peek behind the curtains of business that fail, you’ll uncover an uncomfortable secret. Many businesses fail because they simply run out of cash. Like a car without gas, your business cannot run without the sustaining fuel of cash-cash to keep the lights on, merchandise on the shelf, employees paid, and the owner fed.

 

The following steps will help keep sales flowing to boost cash flow:

Step one – Decide how many new customers or sales you need: Each month what number would be ideal? What is the minimum number of clients (and sales revenue) you can get by with? How many is too many, and could strain your resources and compromise your service? Be crystal clear about who you are marketing to. If you haven’t done so already, create a profile of your ideal customer.

Step two – Understand your sales cycle: How many initial prospects do you need to contact in order to make a presentation? How many presentations do you need to make to gain one new client? What is your closing ratio? It boils down to a numbers game.

Step 3 – Select activities to meet your prospects: Based on the number of initial contacts that you need to make, how many networking events will you need to attend, flyers will you need to mail, calls will you have to make? What sort of prospect-generating activities will work best for you, fit your personality and put you in front of your target clients? Remember: when you have made this contacts, stay in touch with them, nurture them and keep your name in front of them.

Step four – Your sales-cycle timing: In order to plan and predict cash flow, you need to understand the timing of your sales cycle. What is the average length of time from the initial contact to closing the sale and signing the contract or selling your product?

Step five – Your marketing budget: Establish a marketing budget. Be aware of the cost in time as well as in naira. A series of print ads in local newspaper or trade journal may cost thousands of naira, butt take very little of your time; whereas attending networking events is relatively inexpensive, but will take many hours of your time. Don’t forget to compare the cost of gaining a new customer versus the cost of marketing to existing customers.

Step six – Decide on your marketing strategy: Select marketing activities that fit your budget, your available time and your personality. Consistency is key – make marketing activities part of your daily routine!

Be selective – You can’t do everything, so choose a few activities that will work well for you.

Be realistic – Choose activities that you will do without procrastinating. Know yourself and if you have issues that may sabotage your plan, you have two options:

a.) Get help and change

b.) Hire someone else to do it

Be creative – Don’t just stick with what is familiar or comfortable. Try something different – think outside the box. Choose more than one marketing approach. Study other companies that are marketing successfully, talk to those responsible and find out what they’re doing, and how and why it’s working well for them.

Step seven – Track your progress regularly: Evaluate how well your plan is working. Find out which marketing methods are the most effective and are producing the best return on your money and time. Keep a log in a simple spreadsheet and track everything.

Here are seven ways to keep cash-flow roller-coaster ride user check:

1. Prioritise your bills

Priority A – so you can best operate your company without business interruption, there are certain bills to be paid first. They include payroll, rent, taxes, or tardy utility bills.

Priority B – some bills have grace periods, so pay them after gauging their importance. Some come with small penalties which you might more easily absorb. Such bills are important bills but you might be able to delay payment on insurance and utility bills.

Priority C – even if you’re a tad slow, some vendors will work with you, if you communicate with them and make regular payments.

2. Pay with deliberation

For time management, it’s permissible to write your checks at the same time. But disburse your checks according to your priorities. This is to avoid bounced checks and over-draft fees. Label each bill with the payment date. You should also develop master list of your bills with payment.

3. Assess your financials

As the old adage goes: “A sale ain’t a sale until the money’s in the till.” Don’t pay on the sales you hope to make. Pay on revenue that has actually arrived.

4. Don’t operate your company with sales taxes

Maintain a separate account for sales taxes. Don’t even think about using sales taxes as working capital to operate your business. You’ll suffer greatly from stress, fees, interest, and penalties.

5. If you have employees, consider a payroll service

You’ll save valuable time to operate and market your business, if you hire a professional service for the collection and payment of payroll taxes.

6. Evaluate options for your payroll schedule

Not all revenue streams are alike. Some sectors have a high frequency of deposits from daily sales. Others don’t. Restaurants differ from some wholesale suppliers. Learn what’s possible in your locale. If you have a slow revenue stream, you don’t want to issue payroll as frequently as other businesses. A slow payroll schedule also delays payroll tax deposits.

7. Develop and maintain a strong relationship with your bank

Who is more important than a quality credit provider? Treat the relationship like a business marriage. It’s also important to have a good working relationship with your bank, even if you’re not granted a line of credit or loan. Should you unfortunately bounce checks, a local branch manager usually has the authority to waive fees or to honour checks.

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