From my years as the King of Cashflow, I’ve learnt to spot the warning signs of businesses over stretching themselves. Here they are, in order from the most casual to the deadly.
A fall in profit is no reason to ring the emergency bells, but it could be one of the first signs that you’ve got a cashflow problem on your hands. If you don’t have a long term plan to turn any dips around, it’s time to make one. There’s only so long you can survive with less money coming in if what’s going out stays the same. Know where you can cut costs and be ruthless if the time comes.
You might think this one isn’t your fault. Sure, it does fall on your customers to make the payment, but there’s so much you can do to get them handing over the money on time. If you’re finding it harder and harder to close invoices and get cash in your hands, it’s a sign that a rocky time for your cashflow could be about to hit, and you have to act soon. Make sure everyone you deal with knows when payment is due, and don’t be afraid to impose penalties for late payment.
There’s a big step up here. If you’re missing your payment dates, something is wrong. Missing a date from being busy is bad enough, but, if you do it because the cash simply isn’t there, your business is in serious trouble. Make sure you know your dates like the back of your hand and that there’s always enough cash around to pay.
And here’s the big one. If you find yourself negotiating payment dates with suppliers after deals have been done, you need to change something straight away. It’s time to take short term action to increase your cash and pay your debts, but also long term action to work out what costs can be cut, where you can generate more income and what dates you can pay you suppliers by. After all, late payment won’t just cost your business money; you could lose some important contacts too.
If you can spot these warning signs and respond in the right way, your business will survive its cashflow danger zones and make it through to happier times.
Find out how the King of Cashflow keeps more cash in his business here.