How would you like to learn the secrets that will give you an early warning system that cash is about to get tight and then know what you can do to make sure this doesn’t happen in your business?
In this video, you’re about to learn how to figure out what drives cash in your business, and more importantly, what you can do to have an early warning system to make sure that you don’t run out of cash.
If I was to ask you if you want more cash flow from your business, I can almost promise you the answer’s gonna be yes. Then if I ask you, what is it that drives the excess cash in your business, there’s a really good chance you’ll look at me, shrug your shoulders, and say, I don’t know. So today, we’re gonna tackle this issue. You’re about to learn how to figure out what drives cash in your business, and more importantly, what you can do to have an early warning system to make sure that you don’t run out of cash.
So my bet is whenever you have times where cash is tight in your business, you might not know what you had to do. What if I told you that knowing what to do is a lot easier than you ever thought? In this video, you’re gonna learn the secrets that will give you an early warning system that cash is about to get tight and then know what you can do to make sure this doesn’t happen in your business.
Hi, I’m Josh Patrick, Founder of The Sustainable Business, Cracking the Cash Flow Code, and tons of other programs. I’m also the author of Sustainable, a fable about creating an economically and personally sustainable business.
So let’s jump right into our topic today. You know there are two parts to managing your cash. The first is measuring what’s going on, and that’s understanding what’s actually going on in your business, not what you think is going on in your business. Then the second part is, once you know what’s going on and you know what actions need to be taken, you actually take the action that you need to do.
So let’s start with measuring, because in my opinion, most private business owners I run across don’t do a very good job of measuring what’s happening to their cash and why it’s happening. So let’s talk about some stuff that might drive cash in your business. You know it could be your inventory’s going up, and your receivables are going up at the same time. Both of those eat cash. Both of those don’t show up in your profit and loss statement.
How about creating new customers? That was one of the things that really almost drove me out of business when I had my vending company, is that we were creating tons of new customers, buying tons of new vending machines, which were depreciated but not expensed on the P and L. I almost, in fact, I did flat run outta cash. It took me years to dig myself out of that hole.
How ’bout getting repeat sales from customers you have? What kinda sales are you getting? What about keeping the customers that you have? Are you measuring how many customers you lose on a weekly or monthly or semiannual basis?
Now your business might have different numbers than I’ve talked about, but what you really need to do is you need to figure out what are the numbers that drive cash in your business, then you need to do what I call building a dashboard. And all a dashboard is is a measurement system that you can look at quickly to find out where you stand as far as your cash goes. You know some of the things I always put on my dashboards is I wanna know what my cash balances are in the bank.
I wanna know when my cash balances start to decline or fall below a certain level, which gives me time to actually think about what I might do about it.
I want you to start measuring what your backlog is for the work that you’ve got. All businesses have backlog, or most businesses have backlog. Retail businesses really don’t. But all backlog is is how much business have you booked that you haven’t done that you’re gonna be able to bill for sometime in the future. It could be over the next 90 days, it could be over the next 180 days.
I want you to be measuring at least what your backlog is for the next 90 days, and I want you to have a level that you need to have in your business, especially a service business, so if you fall below that, you know you start, you know you need to start taking some actions. I also want you to be measuring new versus lost business.
How much are you bringing in every month as new business? How much are you losing off the end?
That’s lost business. So now not all businesses can do this very well. If you happen to be a lawyer, you’re probably gonna have a hard time with that particular measurement. But if you’re a lawyer, you can certainly be measuring backlog, which is how much business do you have on the books that you haven’t created yet. Now finally, we repeat this again, because it’s such a big deal. If your business is growing really quickly, it’s going to need cash. You need to have some measurement systems in place that you can use to help you understand what you’re going to do when that cash gets eaten.
So now that we know how to measure what’s going on, it’s time to take some action. And that action is I want you to be brave, and I want you to not only develop a dashboard, but I want you to share that dashboard with key staff. And if you’re really really brave, share that dashboard with everybody in your company, ’cause that way, people are gonna know, if cash starts to drop, we all need to get together, we all need to start doing things.
Now your sales staff absolutely has to see that backlog cash flow number so they know what do we need to be doing. You might wanna say gee, it’s time to run a sale. I want you to give discounts to people who sign up over the next 60 days.
The truth is if we take these sort of actions, we’re likely never to have a cash flow deficit that’s gonna keep us up at night.
Now I want you to have weekly meetings with your staff to review the drivers of cash, which means you review the dashboard. At that weekly meeting, you wanna say we’re doing well, we’re not doing well, these are the things that we need to be doing to move ourselves forward. And when things fall out of your normal range that you expect, that’s a sign that you need to be taking action.
Don’t wait to see if it gets better next week or next month. If you’re not taking action as soon as things start falling out of range, you’re gonna often find that you wish there was more cash, but that cash just isn’t there. And you need to take action quickly.
You know one of my stupid sayings I have is “bad news doesn’t get better with age,” and that goes with not taking action. Not taking action doesn’t get better the longer you wait. In fact, the longer that you wait, the more immediate action needs to be, and you might find yourself behind an eight ball where even taking action isn’t gonna do you a whole lotta good.
So now that you know a few things that you can do to drive cash, why don’t you leave a comment below, and also make sure you GET our free infographic on the steps that are necessary for you to crack the cash flow code. And this is Josh Patrick. Thanks for stopping by. I hope to see you back here again really soon.