Controlling cash flow problems |
Impact of your customers on your cash flowEverybody that had been in business for a while will tell you that in business keeping your existing customers happy will cost you less than acquiring new customers. Yet, many businesses, especially startups rush to acquire new customers without really satisfying existing ones. The relationship between your business and your customers is also important. Happy customers are likely to return (stay loyal to your business) than unhappy customers. Knowing who your customers are and their ability to pay you on time is also critical, if you have customers who takes too long to pay what they owe your business, they could affect your cash flow in a sense that they will push your business into a situation where it can not pay its bills when they are due because you are still waiting for outstanding cash from customers. Relationship with your suppliers and creditorsThis is also a critical component of whether or not your business can survive a tough time. Everybody including you, want to be paid on time. However as a small business you would want to make sure that you have most of your money to do business with for as long as possible. This may mean arranging with your creditors to pay them later in the month rather than early. This is to give you a little more time for you to collect from those who owe you before paying everybody you owe. Another reason is that you can do more business with more money, thus the more money you have over a longer period, the more likely you are to satisfy the costs of doing business. Impact of poor planning on your cash flowPoor planning is among the top reasons cited as causes for business failure. Even when things are going great, make sure that you have a plan for slow times and times when the demand exceeds your capacity. In planning for both down and up time for your business, you may want to arrange for overdraft facility with your bank when you need the money, but do not use it until you really need it. You should also try to make such arrangements while your business is doing better, because some lenders will be reluctant to lend you money during a down turn. Overall, if you have to grow your business, make sure that the growth is constant sustainable. Many businesses rush to grow fast to an extent that they expose themselves to going bust or bankrupt during slow times. The trick is to plan, revise the plan and keep planning… |
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