Cash flow problems can be the most consuming aspect of running a small business. With obligations to employees, suppliers, Uncle Sam, and others, a lack of cash can dominate every aspect of your day. It affects your decision making and puts your focus on cash flow rather than profitability.
If you find yourself in this situation, make sure that you consult with wise counsel to help avoid critical mistakes such as not paying taxes (particularly payroll and sales taxes). Also, be sure to communicate, even if it’s not comfortable, and be sure to live up to your commitments. Under promising and over delivering will build trust.
A quick checklist of items to remember to improve financial health:
- Commit to a written budget and review monthly financial statements.
- Know what your break-even point is and specifically which of your products, services, and customers are your most profitable. Many times a business can do less volume and make more net profit.
- Good Decisions comes from Good Data. Just like you review your budget every month, review your benchmarks (the numbers that are most important to you). If you need assistance in determining what these benchmarks are, please pick up the phone and ask for advice.