I’ve been called the Cash Flow Queen for some years, however, until recently I didn’t…
5 Reasons to Watch Your Cash Flow
I was talking to one of my mentors about psychology and how when we focus on the negative, we stay negative, but when we focus on the positive, good things miraculously happen.
I believe it’s the same with cash flow in business. When you check your bank balance daily because you’re worried about how much money is in the account and whether you’ll have enough money to pay the bills, you’re telling your mind to worry about money and the scarcity of it.
A better option would be to have a system in place to watch the cash flow and manage it in a positive way.
Here are my top five reasons to watch your cash flow and reap the positive benefits of doing so:
1. Sleep better at night.
Don’t underestimate the power of a good nights’ sleep. The debilitating effects of poor sleep over an extended period of time lead to grumpiness, moodiness, arguments, negativity and in the worst cases, depression. Much better to know your numbers and get a good nights’ sleep.
2. Focus where it matters.
When you know what the upcoming cash flow looks like, you can take action to improve the results. This might mean phoning up your clients or customers to chase up outstanding payments or putting in place payment arrangements with suppliers.
3. Peace of mind and feeling happier.
Having a cash flow forecast that shows you what money is due in when, and what payments you need to make, provides information that can reduce your stress and give you peace of mind. Updating the forecast on a daily or weekly basis means that you always know where you stand and when you need to take action.
It’s usually in the not knowing that our stress levels are at their highest. With knowledge comes the ability to make decisions which in turn leads to peace of mind.
4. Watch your cash flow and take remedial action when needed.
When you do this, the rest of the time you can concentrate on what you do best without worrying about the money. Allocate time each day or at the end of the week to review your cash flow position. Make decisions about what needs to be done, whether it is chasing in payments, landing a new client or contract, or reducing costs. Then, put money out of your mind and concentrate on what you do best, sales, marketing and strategic planning.
5. What you can foresee you can adjust or change.
You may find that when you look at your cash flow forecast, there is a shortfall that you just won’t be able to fill by getting invoices paid faster or deferring supplier payments. In this situation, there are short-term funding options that can tide you over.
If your clients or customers are businesses, you may be able to obtain invoice finance and get paid up-front when you invoice. I’ve recently been talking to the team at Waddle who provide this type of service which they have automated by accessing your financial information directly from your Xero file (with your permission, of course). It’s all done online, and you can find out very quickly whether you are eligible for funding or not.
In summary, don’t bury your head in the sand hoping that your cash flow issues will disappear. They won’t, at least not without some input from you. The benefit of having your finger on the pulse of your cash flow is in knowing what steps you can take to improve it, considering options like invoice finance and/or chasing payments from clients or customers.
When you take action, you will reduce the stress, get better sleep and are able to concentrate on your business and be happier in the process.
“The opinions expressed by Smallville Contributors are their own, not those of www.smallville.com.au"
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