August 1, 2012
Accounting & Taxation, Financial Strategy, Improve Cashflow, Increase Profit
What’s your biggest business stress right now? If you answered with “cashflow”, then you are normal! Without a doubt, cashflow is one of the biggest concerns for the business owners we speak with in Bendigo and around Central Victoria.
In my experience, there is a very clear and easy to implement three step process for improving your cashflow, and that is “Map, Move and Measure”.
In the lead up to our cashflow workshops, “The 7 Simple Steps for Guaranteed Cashflow Success” coming up on August 21 and 22, I will be posting a series of blog posts to flesh out exactly what I mean by Map, Move and Measure. As a teaser though;
- Map refers to mapping out what needs to be done to improve the situation – the plan.
- Move refers to identifying the areas that need to ‘move’ to see a real cashflow improvement – the strategies.
- Measure is about determining specifically which strategies have been successful, which haven’t, and which are providing the highest return on investment in the shortest time – the results!
So today’s blog is all about the MAP – Mapping out your cashflow solution. And there are just 2 simple steps to Mapping out your cashflow solution.
Number One – If we want to get a better result, we need to work out what is causing the problem.
No point fixing something if it isn’t broken, or putting effort into something that won’t necessarily put cash in the bank.
A question for you to consider – What is causing cashflow stress in your business?
In your business, have a look at the following factors. Do you have;
- Comparatively low profits?
- Slow debt collection?
- Too much stock on hand?
- Pay creditors too quickly?
- Pay too much tax?
- High debt repayments?
- Large capital purchases?
- Owners taking too much money out of the business?
Any one of these – or likely a combination of several – may be causing “cash leakage”.
I know that you have limited time and money, and probably better things to do, right? So it’s really important that whatever it is you decide to implement in order to improve your cash position is going to give you the result you want.
Once you’ve identified the precise problems for your business – and more often than not these problems are identified much easier by an external person such as an accountant – you can work out what specific improvements in these areas will do for your business cashflow.
For example, if you decrease your debtor days from 45 to 35, what does it mean in terms of raw cash improvement? If we refinance, in order to slow down debt repayments or reduce fees, what does this do for new cashflow result? One you know the answers to these questions, it becomes much easier to work on the strategies to cause the results!
Number Two – Working out how much cash you want or need.
Once you know what you’re aiming for, you can work out what you specifically need to do to achieve it. Your cash goal could be based on a number of factors, such as money needed for a business expansion, new equipment or even for a holiday!
If we set a surplus cash goal, we can then determine your required level of cashflow improvement activity. We work through each of the above factors to determine if there is opportunity for growth and work out what specific changes will put cash directly in your bank.
Quite simply, we have now Mapped out what needs to be done to get your cash position where you want it to be. But it doesn’t end here – It is this level of cashflow improvement activity that is a solid part of our next write-up; MOVE.
Remember, Decisions x Actions = Results. I hope today you have made some cashflow decisions. Now you need to take some action and Move on these to make sure you get your desired results.
And to ensure you achieve a great cashflow result, take action now by registering for The 7 Simple Steps for Guaranteed Cashflow Success. And when you register, receive the May Partners Cashflow Growth pack, for FREE!
Inside the pack, you’ll receive;
- A copy our new eBook, “How to Turn Cashflow Stress into Cashflow Success”,
- and the May Partners Net Variable Cashflow Calculator.
So head to http://maypartners9.eventbrite.com now and take advantage of the Early Bird pricing. Just $67 for three tickets!