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168 - Is Money Slipping Through Your Fingers?

This article is based on critical questions I’m often asked by clients, who are smart and savvy women entrepreneurs ready for change. 

From improving cash flow…. to increasing staff productivity…. to scaling for growth, these periods of transition — and so many more —  provide both challenges and opportunities. Managed effectively, change can become a productive force for growth. The Block Group harnesses that potential, bringing together the people, resources and ideas that build results.

Patty-W-Block-Small-2All the best! 

Patty Block

©The Block Group Inc. All rights reserved.

Building Solid Companies That Move Forward


Why Do I Struggle with Cash Flow?

Henry Ford once famously said: "Vision without execution is just hallucination."  I love this quote because it’s funny and it’s true!  

While revenue production is the core goal for every business, the real magic is in understanding and managing your cash cycle. You can’t execute without cash.

Many small businesses struggle to appropriately price their services, define their billing and collection terms, and manage the cash flowing through their companies. If you are not developing and implementing cash strategies, you are leaving money on the table.

How Do I Know?

These early warning signs are among the most common concerns we hear from women business owners we work with. How many of these resonate with you?

  • Do you struggle to pay your bills?
  • Is making payroll a constant worry?
  • Are you afraid to hire staff because your revenue is uneven?
  • Are you charging too little and over-delivering on services, so client accounts are not profitable?
  • Do you have trouble collecting what is owed from clients?
  • Are you embarrassed to admit you are in financial trouble?
  • Do you suffer so much stress around money you can’t focus on strategic issues – for your company or for your clients?

What Happens Next?

Ignoring these early warning signs leads to serious consequences.  How many of these are you already suffering from?

  • Is your revenue unsteady?
  • Are your relationships with clients and vendors suffering?
  • Are you having trouble attracting or retaining high-quality staff?
  • Do you have unprofitable client accounts?
  • Are you damaging your personal and business credit?
  • Is your company growth stunted?
  • Is your company reputation suffering?
  • Is your emotional stress level over the top?

How Do I Fix This?

There are many things you can do to speed up your cash cycle, enhance profitability and gain control of your finances.

It can be as simple as establishing a pro-active billings and collections process or as complex as changing your pricing and reducing expenses.

While this may feel overwhelming, by working with a business advisor, you have a guide to help you develop and implement these proactive cash flow tactics:

1. Launch ‘Collections Monday’.

Schedule courtesy calls to clients before the payment is due. Ask if they received the invoice and whether they have any questions. Name it something clever, like ‘Collections Mondays’ and get in the habit of making these calls. E-mail is for cowards – pick up the phone!

2. Keep Your Cash for as Long as Possible.

Prioritize payments to vendors and maximize the time allowed to pay. Stagger payment dates so you don’t have significant cash flying out of your operating account all at once.  Maintain your good relationships with vendors and negotiate terms when possible.

3. Get to Know Your Banker.

Ensure that all of your bank accounts are federally insured.  The coverage is different for personal and business bank accounts. Meet with your banker regularly to establish a strong relationship. Think of the banker as your advocate.

4. Stop Using Sales Tax or Payroll Tax Money to Float Your Operations!

This is dangerous on so many levels. Your exposure to potential penalties, fees and interest, along with a significant waste of your time and resources should stop you in your tracks. Deposit funds into additional bank accounts, separate from your operating account – and don’t touch the funds until you pay the required taxes. Obtain short-term operations financing, if needed. 

5. Obtain a Business Line of Credit.  

You can only get a line of credit or loan when you don’t need it. Plan ahead and have this safety net in place, with the added bonus that it can help you build business credit. Compare terms and rates between banks and with credit unions. 

6. Carefully Track Use of Company Credit Cards. 

Set limits on all cards used by employees. The federal Credit CARD Act protects consumer credit cards but excludes those used for business and debit cards. You may have significant exposure to fraud and theft with company credit and debit cards. 

7. Outsource Important Compliance Functions, Such as Payroll. 

Leave the headaches to the experts who will process payroll, collect and pay your payroll taxes and ensure reporting compliance. It is worth every penny.

8. Work with a Business Advisor. 

Tactics are important but an overall financial strategy will determine your company direction.  Business Advisors bring a wealth of experience and knowledge to help you chart this course.  Business owners routinely hire bookkeepers to keep track of funds, an accountant to ensure financial compliance, and an attorney to collect overdue accounts, but they seem hesitant to hire an expert to develop the financial strategy. Don’t make that same mistake.

Now What?

Henry Ford built his reputation and his company with an innovative vision and an expertly executed plan. He understood the power of automation and the importance of having cash in order to make his vision a reality.

As a small company, you have an advantage in spotting trends from real data and real market experience, and making decisions that you can implement quickly. This gives you a competitive edge, especially against larger companies that often struggle with bureaucracy and chain-of-command.  Ensure you have the cash to execute on your vision.

Business Coach in Houston

Patty-W-Block-Small-2

All the best!

Patty Block

©The Block Group Inc. All rights reserved.

Building Solid Companies That Move Forward

Building Blocks