Are you taking steps to keep cash king?
In our house, the dogs are in charge. At least that’s how it seems. They dictate a lot of our activities – from which side of the couch I get to sit on to when I need to be home. They complain loudly when they want something regardless of my Zoom status and they force me outside in the rain.
While the dogs may rule the castle, I am still the queen, orchestrating all the dogs’ activities. Without me, they don’t eat, they don’t get to go on walks, and they don’t get chew toys.
This concept parallels the classic phrase “cash is king”. While it is true you need money coming into your business to succeed, you also need the queen to be orchestrating the cash behind the scenes.
Much like I orchestrate all the activities of the dogs, the business owner and their team need to orchestrate the activities to keep cash flowing into the business. Your P&L or accounts receivables can show great growth. However, if you aren’t getting paid, then all the growth on paper will not prevent a cash flow problem.
Are you taking the steps necessary to keep cash front and center?
As you run your business, you need to prioritize the activities that ensure you have the cash you need. Take the time to evaluate these three activities that allow you to consistently have cash on hand to pay your expenses and prepare for the unexpected.
Invoice your customers/clients.
This seems obvious. Without an invoice, your customers are not going to pay you. Yet many business owners put it off or fail to do it consistently. This is the first step to having money in the bank. You need to prioritize this activity and complete it at the interval that is in your contracts. If you cannot or do not want to do the invoicing yourself, have a team member complete the task or outsource it to your bookkeeper or virtual assistant. Regardless of how it is done, make sure it is done consistently.
Collect from your customers/clients.
When you invoice, provide clear directions on how you can be paid. Make it easy on your client to pay you. Be comfortable with transaction costs if it means you get paid faster. For those that are not paying in a timely manner, follow up with them. Most customers/clients are not avoiding you and appreciate the reminder. Oftentimes invoices have simply fallen through the cracks, or their process has been delayed. Continue following up with your clients until they pay their invoices.
Track the timing of your cash flow.
Each client has a different payment process which means clients have different timing for when you get the money. Typically, however, each client is consistent with their timing. Track the timing of the payments so you know when you can anticipate each customer’s payment arriving in your account. If you have seasonality to your service or product, track the timing of payments and how they stack up on a particular month or quarter. Then plan your budget and spend according to that flow. Understanding the ebb and flow of your cash will allow you to be prepared and maintain reserves to weather the seasons with less in-flow of cash.
We are all working very hard to secure the accounts and sales we need to sustain ourselves and our business. We need to acknowledge that closing the deal does not eliminate the stress of making payroll or buying supplies to deliver the product. The cash needs to come in the door to ensure things run smoothly and your business can thrive. Until money starts growing on trees, it is imperative that you, and your business, focus on orchestrating the behind-the-scenes activities that make cash king.