What can I do to make things better?

There might be other reasons why you cash is short – too much inventory and slow sales, too much discounting, increased business costs, or other reasons.

• Create a sales forecast and cash flow for the next 12 months.
• Review the cash flow and highlight the periods when your cash is low.
• Avoid adding extra commitments to the business at these times like marketing or purchasing of inventory.
• Arrange for additional cash/working capital to be made to the business during these times when cash is low.
• Reduce expenditure which won’t impact the performance of the business.

If you don’t have a sales and cash flow forecast, then this is the first step in fixing your cash flow problems.  Without this, you won’t really know how much cash you have.  Looking at bank statements or profit and loss reports isn’t enough as this won’t cover outgoing cash commitments like GST, staff payments, supplier payments, marketing costs etc.  A profitable business doesn’t guarantee spare cash!

Creating a sales forecast or cash flow might not be something you are comfortable doing, or have the time. If that is the case, then outsource this to your bookkeeper or accountant.

Having this information will open your eyes as to where your cash is going. Once you have the cash flow, you are able to make changes as to where you are spending your cash.  Maybe you don’t need all those subscriptions or you are spending too much on stationery?  If you know when you have spare cash you could use that to negotiate discounts on inventory by paying cash up front? This could also apply to any marketing suppliers to the business.

Knowing when your cash might be low allows you to make arrangements well in advance to secure additional working capital before it is needed so you aren’t rushing around at the last minute trying to borrow money!