Humans are the most insatiable beings I know on earth. At least, they were at the time this article was written. We always need more; or rather, we always think we need more.
When business is not moving forward, most entrepreneurs assume that all they need is a little more cash to push them forward. That is not always true. You don’t always need more cash injected into your business. Most times, what you need are Money Management Skills. Money is very volatile and you need a lot of Money Wisdom to retain it.
Consider these 5 things you should do before that big investment comes in.
1) Open a Bank Account:
I consider a commercial bank account the first thing you must do in a bid to manage your business cash because liquid cash flows very fast. In fact, the name “liquid cash” says it all. If you are disciplined, having cash at hand might be your only problem.
Whatever the size of your business, as soon as you have gotten it registered, you should open a bank account. It is as simple as taking your registration papers and personal identifications to any commercial bank. They will guide you through all the processes.
The next most important thing to do is have a budget for your business expenditure. You can create a template for expected budget ahead of time and then make necessary corrections as dates approach.
Have a daily, weekly, monthly and yearly budget depending on the nature of your business. A budget helps you track cash inflow and outflow, discover wastage and helps you save.
Running your business without a budget is like cycling blind folded; your business would run out of cash more often than expected.
3) Take Proper Records:
Similar to a budget is a record of your Expenditure and Sales. A budget is a plan of how you expect to spend money and how you intend to recover it with profit. On the other hand an Expenditure and Sales record is a document that spells out how exactly cash flows in and out of your business.
As an entrepreneur, your major goal should be to synchronize your actual expenditure and sales with your budget.
If you spend more than you budgeted to spend before a particular time, you would run out of cash. A sales and expense record will help you prepare the next budget which will in turn help you control your next expenditure.
I can spend the remaining days in this year explaining to you why you need to SAVE! Whether it is your personal finance, your family finance or your company’s finance, if you don’t save, you are only laying your bed in the bosom of bankruptcy. When they hear save, most people think only of the extra cash they keep in their savings account after all expenditures have been made. While that is true, to save generally means to spend less. The amount you have left is what you call savings. If you are just starting a small business, saving for you might mean denying yourself some luxury or performing more than one task rather than outsourcing. For a large scale business, saving might mean buying fairly used equipment and furniture or hiring a little less staff. If you read the article I wrote on Deadly Mistakes Startups Make, you would see where I explained that hiring too many staffs too early can lead to the fall of your business.
I sincerely think I need to write a separate article about saving because I am sure you are serious about attaining success in Business and in life generally. But there is really no way you can attain that success if you don’t start SAVING.
5) Avoid unnecessary Credits
If your business involves Buying and Selling, then you really need to take this point seriously. The only time customers are really eager to pay for goods is before delivery. Once they have what they want, excuses starts coming up and your cash gets tied down. This is how every customer tend to behave and there is nothing you can do about it.
If your business is service based, then you might not be overly affected by delayed payment or even no payment at all. This is the reason why I advice anyone in business to try and cut down credits as much and as often as possible. You might ask;
How can I Cut down Credits?
First, you should create various channels for your customers to pay apart from cash. Give them your account number, allow the use of POS, accept bank transfers and cheques. By doing this, you have reduced their reasons for not paying by one.
Secondly, you can give reward/discount to customers who pay before service. If you are providing any kind of service where the customer have to subscribe weekly or monthly, then you can give rewards for auto renewals or to customers who for example subscribe for a whole year.
Ultimately, you need to know your customers individually. There are some you can’t afford to give credits to because they may never pay or end up paying part. There are some that will end up paying but would delay a lot. There are some that might not delay, but just like to see the product before paying and there is my best set that always pay upfront.
Once you understand them, you would know who can or cannot receive credits and you would know the right time to give out credits.