I am often referred into a business that is struggling financially, but a lot of time the owner or bookkeeper can’t pinpoint what is actually causing this struggle. Their financials may show a profit but there is little money actually in their bank account. They are feeling stressed out, worried about making payroll, and wondering why they are struggling with Cash Flow.
Often, they are too embarrassed or scared to admit that there is a Cash Flow problem or don’t know who they can turn to. Discussing the issues with their staff or team members could cause panic and a loss of faith in their employer, and telling even trusted friends or family is often taboo. So, many business owners take on all the stress and fear of their Cash Flow problem—alone, and try to patch it up as best as they can—alone.
My job is to shine a light on these problems. My ultimate goal is to give business owners relief and security—a safe place to reveal their fears and problems without any judgment or blame—and then to move to help them put in place real strategies and action items to get them back on track and create a healthy Cash Flow. My process is designed to be straightforward; to show business owners the way to look at their money rationally, without emotion attached, in order to find a solution.
So, you may be wondering – what are some red flags that you may have a cash flow problem? What should you be watching for? Many of us may be seeing stress in people we know, but they are too afraid to tell us why. These are the people I’m here to help. So here are a few things to watch for that may indicate Cash Flow problems:
1. Not Paying Yourself:
Have you put off paying yourself so that you can instead pay your employees? This is a big red flag. As the business owner, you deserve a fair salary just as much as your employees. Not paying yourself regularly makes it hard to keep yourself productive and motivated, which is essential to the energy of your business. In addition, not paying yourself will snowball into financial issues at work and at home, which leads to stress in every area of your life. Bottom line – if you don’t have enough money to pay yourself on a regular basis, there is a problem with cash flow!
2. Making Payroll is Difficult:
Are you lying awake at night stressed about how you’re going to make your payroll? Many business owners I talk to say that this is the number one problem they face, and having to face it twice a month truly takes its toll.
3. Debt is High & Feels Unmanageable:
Do you use your credit cards to pay your bills, but do not pay them off each month? And/or do you use a line of credit and it keeps getting bigger; not smaller? This is a definite red flag that you have Cash Flow issues that need to be addressed. While it is a smart business practice to have credit cards that have good rewards for your business, if you are not paying them off completely each month, you should take notice. Your line of credit is a tool that should be used on occasion and paid off as quickly as possible. It’s a short term debt strategy. Not being able to pay it off helps to identify a cash flow problem.
4. Accounts Receivable:
Is your Accounts Receivable high? Do you lack a solid process for collections? Either of these can be huge factors in hurting Cash Flow. Money coming into the business needs to happen as quickly as possible. The longer your customers or patients owe you money, the less likely it will be for you to collect it. It is important to have a strong process and understanding of Accounts Receivable to keep your Cash Flow flowing.
5. Accounts Payable:
Are you juggling your vendor bills: paying some here and some there to keep yourself afloat? Do you have outstanding bills over 60 days? This can be a sign that trouble is on the horizon. Paying your bills without having a good process in place may be a contributing factor to having a shortage of cash on hand. While it is important to keep a good relationship with your vendors, it is also imperative to prioritize, and make sure that you are taking full advantage of the payment terms your vendor is offering to help keep your Cash Flow optimized.
If any of these issues stand out to you or you notice them in someone else you know, there is most likely a Cash Flow problem. Even if the money pinch is only slight right now, chances are it’s on its way to a larger problem down the road. Hope is not a strategy for solving cash flow problems! Now is the time to discuss what is happening in your business and head off financial squalls. Optimizing Cash Flow to avoid a financial storm in the future is not about the next 30 days. We look further down the road to create strategies that will affect your Cash Flow 60 or even 90 days from now. I help business owners who are feeling the stresses of Cash Flow but feel alone and as if they have no one to turn to, to find peace and clarity. Together, we can get you feeling successful and empowered when looking at your financials.