Smart Resolutions all Small Business Owners Should Make to Improve Cash Flow
Love it or hate it, it’s that time of year for making (and unfortunately breaking) those New Year’s Resolutions.
At some point in our lives we have all made resolutions to either get fitter, lose weight, save money, read more or go on that dream holiday. All great personal goals, but what about for your business?
A resolution, after all, is a decision to do something different to bring about positive change.
For business owners, making New Year’s resolutions can help align and focus your efforts and energy. I asked my network for their recommendations for smart resolutions to improve your cash flow in 2020 and here they are.
1. Start with the right mindset
Deciding on resolutions and setting goals is all very well, but if we don’t have the right mindset, we risk underachieving, or worse giving up completely.
Helen Breward of Pebbles Hypnotherapy shares these five steps to success:
- Mindset – it is well worth taking 5 minutes, to close your eyes (cuts down on distractions) and imagine that you have achieved that goal. Really allow yourself to imagine in detail how it feels, how your business has benefited, how your life has changed. Above all, you need to imagine what it is going to feel like when your goal is achieved, when you are successful. Keep reminding yourself of this often.
- Work backwards from your outcome, so the you know what small step you need to take next, today or tomorrow, to take you 1 step closer.
- Focus on the end goal but take it one step at a time. Doing this makes it more achievable.
- Determination, how determined are you to achieve that goal? In other words, how much does it excite you? How much do you really want to succeed? How much do you want to avoid the pain of failure? It is these things our feelings that motivate us the most, the thought of pleasure or avoiding pain. So, attach a feeling to it.
- Place images of your goal/resolution in places you will see them often, just to remind you. Always keep your goal in mind and how much you really want it. Mindset Focus.
2. Sell more!
It may seem obvious, but sometimes cash flow issues are not about the timing of payments in and out of your bank account but that more is going out than coming in!
Sales trainer, Diane Banister of Intelligent Dialogue says “One of the best ways to improve cash flow is to make more sales.”
“If you need to do that quickly – then start with your existing customers. You have an existing relationship with them, they know like and trust you. How can you re-engage with them so that they buy more from you?”
“The quickest and easiest way to sell more and hit your sales targets, is to take a step back, and work out what is working for you in your business and do more of it. That way you have the confidence of knowing that you have the skills and processes already in house to make that work for you.”
Marketing expert Sarah Archer, from Story Led Marketing, adds “invest in building a sustainable content marketing system that consistently generates leads so that your sales pipeline never dries up, (but also make sure you have your fulfilment systems in place too, so that you are ready to deliver on those volumes!)
3. Stop treating your business bank account like it’s your personal account
Very difficult to do when you’re a sole trader and don’t have a separate bank account for your business (I would highly recommend that you do), but a common cash flow pitfall for owner managed businesses.
Accountant, Steph Rickaby of Sunflower Accounts advises “you can only take cash from the company for a specific reason. For example, salary or distribute dividends. For dividends you need to know that you are making the profits as you can only vote dividends from the profits of the company.”
Steph recommends the following to all her clients:
- A bookkeeping system that is maintained at least weekly to be able to monitor your profits.
- Prepare a personal budget, know how much you need the company to make to support you.
- Don’t draw from the company more than profits made (after putting aside 19% for corporation tax!)
“Finally, if you are not making the profits to cover your personal budget, then that is a different issue! And you probably ought to start with a business plan!”
Knowing what profit you’re making, and therefore what you can draw out of your business, is not just about your accountant producing a year end profit and loss statement. Ali Wiltshire of Fiscal Business Services says that doing “weekly, monthly and quarterly forecasting will help you identify the peaks and troughs to encourage you to take appropriate action.”
4. Keep on top of your Debtors
It’s great making the sales, it can be slightly more uncomfortable making sure you get paid for them.
Business coach, Rachel Spratling of Chalkhill Blue Ltd advocates “getting a system / process in place for managing debtors. So, you diarise when you send out your invoices each month and then diarise when you chase up any non-payers.”
“Where she often sees people get into trouble with cash collection is when they don’t manage it on a regular basis and consequently don’t chase people up regularly when an invoice becomes overdue.”
The thought of chasing late payers can be stressful for some business owners, the fear of confrontation or upsetting the relationship is very real (though actually unlikely to happen).
I always advise talking to people rather than hiding behind email and preparing for the call can help you overcome those fears.
If you don’t have the time to keep on top of your debtors, consider outsourcing your credit control.
5. Take care of you!
We all know that when we’re feeling a bit under the weather our enthusiasm wains and our ability to stay focused is challenged.
As Linda Clarke, life coach and hypnotherapist, points out “Running your own business isn’t always easy – it can be very stressful; Particularly if, like me, you are a sole trader.
It can be lonely and isolating at times because there is no-one to share ideas and worries with. It is also hard not to take rejection personally.
Because of the work that I do I know how important it is to manage my stress. High stress levels affect:-
- Our ability to have creative, logical and flexible thinking
- Our memory function and concentration
- The quality of our sleep and we wake up exhausted
Which can lead to self-doubt, procrastination, poor motivation and poor productivity.”
Linda urges us all to commit to ensuring that we are thriving mentally and physically through daily practices so that our business can thrive.
It’s OK to take time off from your business and just have a good time. Pressing the pause or reset button regularly will help you be a better business owner.
All resolutions require effort and dedication, but it will all be worthwhile when you see that healthy cash flow. If you think you need a little help in making them happen, we’re all here for you, just get in touch.