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CASH FLOW WORRIES CAN DAMAGE YOUR HEALTH

05 Jan 2022 // by Dave Hickey

Some tips on how to manage the stress

A few years ago I interviewed business leaders from a wide range of businesses and backgrounds for the local newspaper.

One CEO of a fairly recent start-up was talking about managing cash and struggling to meet payroll every month. He told of some months when there wasn’t enough cash to pay staff and himself, so he did without. He produced a bundle of loyalty cards from local coffee shops which he used to keep him fed during the working day until cash came in from customers.

Another, older, CEO, who spent the working week in the city before returning home during downtimes, told me of the weeks when he couldn’t pay himself enough to eat a decent meal every day, so he waited until he got home at the end of his week to eat properly.

“Nobody gives you a test in finance when you decide to start your own business. You just have to get on with it.”

Neither had direct financial management experience before starting their businesses but it would be no guarantee of an easier life if they had.

I’ve had over 30 years’ experience in senior finance and CEO roles and I too have lived the experiences mentioned above along with the sleepless nights and the anxious juggling of payments to suppliers, Revenue, etc.

A few tips for helping to reduce the stress – and damage to your health – caused by something that happens to most business leaders and entrepreneurs at some stage.

  • Have a Plan

Prepare a daily, weekly and monthly cash flow plan.

  • Track Cash Flow Every Day

Make sure you monitor cash at least daily using your bank’s online service together with your own records of what’s due to be paid or received and when.

  • Early Warning System

Focus on the one or two measures which you can track daily which might give you early warning if something’s not on track. It could be footfall, site visits or conversion rates. Know what you can do to address the issue if needed.

  • Reduce Cash Conversion Time

If you have to generate invoices for goods or services, make sure this is automated as much as possible to reduce the time between delivery and invoicing. A day can make a big difference, so make sure those invoices are dispatched on time and electronically.

  • Discounts & Incentives

Offer incentives for early or prompt payment. These can be in the form of vouchers for future purchases rather than cash. Ask suppliers for discounts if you pay them on time.

  • Under Promise & Over Deliver

Talk to your bank and to Revenue. Let them know you foresee a problem and have a plan to deal with it. If you predict late payments to them, let them know and also when you expect to be back on track. Aim to deliver earlier than forecast (only slightly). You never know when you’ll need their support again.

Cash Flow can be a real worry at any time. Being prepared for it and having a plan that you can put in place to deal with it will help reduce the stress on you and your leadership team.

Your Local Enterprise Office runs Business Planning and Financial Intelligence courses which can really improve your team’s ability to plan for and deal with the unexpected.

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