An essential cashflow management guide for difficult times

It’s just as easy to go broke in a boom as it is in a bust. Equally you can make profit with negative cashflow and a loss with positive cashflow.

Whilst a good majority of business owners will continue to look at their feet, some will raise their gaze to focus on opportunities.

Difficult times call for extraordinary measures to protect and grow the cashflow in your business. 

Cashflow management has two distinct levels in this conversation, firstly knowing your cash position, and secondly working on how you secure the current and maximise your future.

They are inextricably linked and inevitably separated. Let us start with the separation before we explore the linkages.

Cashflow for your business is like blood flow through our hearts. We call it cashflow-ology; cardio for your business.

Knowing NOW!

Feeling chest pain might be the pre-cursor to a heart attack.

If you were in this situation, I am sure you would get to medical help to ensure you took advantage of whatever medical help was needed to get the best outcome possible.

The same applies to your business.

Cashflow stress starts in the form of starting to pay late and then really struggling.

Sometimes there is ATO debt that starts to accumulate and then it can get worse.

Ignoring the chest pain does not make the impending heart attack go away!

The daily discipline of updating your cashflow forecast so you know where you are at is a discipline few business owners and entrepreneurs do.

Their focus on cashflow generally happens when they need to make payroll or pay some bills.

Seeing a challenge a few months ahead of time allows us to change course or mitigate exposure and risk.

In these turbulent times we could be in boom or bust.

Either way, have appropriate credit policies in place and the dedicated resources to get the money in without losing our customer base.

You need to be proactive. 

Is there cashflow hiding in your business?

Getting a good handle on your business and cashflow cycles will help you prioritise freeing up cashflow hiding spots.

You might not see them as cashflow, however excess stock on the shelf, on the factory floor, debtors or surplus assets are all forms of cashflow.

Running your business at less than optimal efficiency, with a little excess capacity for growth, also can strangle your bank balance. 

Is your balance sheet sucking cashflow also?

Do you have financing and loan repayments that by-pass your Profit and Loss to drain your cashflow?

Are you getting sufficient return on your investment here?

Do you have a cash-gap in your business cycles and are you able to get it to zero or below?

Using other people’s money to grow your business makes life a great deal easier!

Do you have a problem? 

Being able to foresee a cashflow challenge ahead of time allows you to look for the most appropriate solution, and there may be a number of alternatives.

There are many stimulus-driven incentives both personal and in business.

Knowing if you or your business has a problem ahead of time is key to then taking action.

Supply chains have fundamentally changed as we are virtually connected but regionally isolated.

Knowing your supply lines, opportunities and associated costs is paramount in this rapidly changing world. Some of the cost changes are significant.

Where is your opportunity?

Your mental health might be impacted in these current turbulent times.

It’s not at all surprising given the high dependence you may have for the survival of your business.

These are once in a lifetime events that we have not experienced before.

Self-care is paramount and if you need support, ask for it!

Getting a clear and relaxed headspace helps you focus on your business and associated opportunities. 

Where is the economy booming and are you able to find your way into the fast lane?

What do you need to learn to adapt to the new normal?

Your world will not return to the way it was, what will it look like for the industry you are in?

Business is changing faster than ever before. The need for planning, thinking, and charting your course is a far greater part of business now than previously.

The ability to think of your future direction is difficult due to the stresses you are under.

Meditation, time out of our business and away from it are key aspects of allowing your headspace to calm and think through possibilities.

Be kind to yourself – this is an unprecedented time and look for the opportunities that you can create!

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Paul Roach

Paul Roach is a sought-after business strategist and coach who has worked with hundreds of SMEs across many industries to supercharge their cashflow.