The ‘2.37am wake up fear’ for many small business owners.
The cry of despair of a business owner caught in a crushing cash-squeeze. Occasionally it is true, and marks the death-knell of the business.
But normally the business owner is looking in the wrong places.
The top two numbers most business owners look at: sales, and cash at the bank.
Sometimes, getting close to the end of financial year, they get excited about tax planning and profits – hoping for a shareholder’s dividend.
Ask them what the balance sheet is and you can expect a blank stare.
But that is where your cash is – in other people’s bank accounts.
And the two most common places: creditors and inventory.
Creditors – people who owe you money – need an active management process. Clear payment terms, vigilant watching, and persistent follow-up. With red flags when they go outside the lanes.
A well-managed creditor program will keep the money flowing and alert you to risks.
Inventory though is a whole can of worms.
At one level it’s quite simple; stock sitting on the shed floor is money waiting to happen.
However, too much stock, the wrong stock, or not even knowing the total actual you have, is draining cash out of your business every day.
And interest rates are rising fast. A double whammy.
Efficient and cash-positive inventory management relies on accurate data and processes. And that’s where the troubles start.
Too many businesses rely on spreadsheets and manual entry, or archaic inventory management systems. Which hide their real cash position and leave them exposed.
Because you can’t manage what you don’t measure. Which is a cliché, but when it comes to inventory, it’s true.
If you have any concerns about your actual cash or inventory position, get in touch.
We are here to help.