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Nine Ways on How to Avoid Cash-Flow Problems in Your Business
c Syd Stewart 2003
Most businesses that fail do so because of cash-flow difficulties.
Nature is similar to business in many ways, so what can we learn from
nature and evolution.
In nature, proteins support all the vital activities or functions from
movement, growth, to reproduction. The word protein means from Greek of first importance. Proteins form the structural basis of all living cells! Proteins are used for building and repairing cells.
Cash is a key business protein. In humans, proteins are sourced from
nutrients such as meat, fish and eggs. Lack of Protein prevents proper
growth and repair. Protein deficiency can cause disease.
So here are nine ways to avoid cash problems:
1) Ensure you have enough funds before you start any venture. Have cash
to last three times longer than what time you think it will take.
2) Set the right price. A banking friend, with years of experience
working with small business, tells me price setting is one of the
biggest problems with small firms. Many businesses fail because they did
not charge enough. It's crucial. Test your market. Sometimes lowering
prices can raise more sales and revenue. Add more value for your
customer, especially if it does not cost you too much, and then raise
prices. Be confident, do a good job and raise prices.
3) Avoid doing business with folks that you suspect have cash problems.
4) Raise invoices promptly.
5) Be strict; don't give further credit to those who won't pay their
existing bills.
6) Raise frequent statements to chase your money. Some folks won't pay
until they receive a statement or several reminders.
7) Follow up with a call if a bill is not being settled. Check to see if
there is a problem with your goods or services. You need to be
proactive.
8) Establish a Sales Ledger with an Aged Debtors Report
9)Produce Monthly Profit/Loss and Balance Sheet Reports no later than 2
weeks after each month end - If you don't understand these reports - get
Finally build these ways into the routine of your business. Create
written procedures for your staff to follow. Remember cash like proteins
in nature is of first importance to your business.
Syd Stewart - is a chartered engineer with 30 plus years experience of
managing and owning a business. He is author of the 'Smiling Owner'
E-Handbook in which simple evolutionary business solutions yield Greater
Profits, Sustained Growth, Security, and More Fun for small business
owners. See Website for more information.
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