Tag Archives: #cash flow

Robbing Peter to Pay Paul

The phrase which has its disputed origin between two separate ideas, without question does date back to 1661, in the end is all about determining how best to pay for something that you don’t have the monies for.  In 2019, the greatest example of this is our credit card debt that businesses use to survive, not to mention interest only loans and lines of credit which are becoming much more appealing as a way of quick cash to cover the cash flow issues that we all face in today’s climate.

What can cause cash flow issues?

  • The amount of sales that you were expecting just doesn’t materialize because let’s face it, our customers can be quick fickle and we can’t always predict what they’re going to do nor can we count on them to perform 100% of the time.
  • The cushion that we are all supposed to have is flat or doesn’t exist at all. One of the biggest challenges that I regret when travelling is when the pillow is the cheapest provided possible, which doesn’t give me any ideal sleep.  Even putting 5-6 of these together to make a decent one, still doesn’t replace a good pillow that had cost a likely a few dollars more.  No having available credit shouldn’t count as your cushion either, because it’s a challenge getting it paid back down again.
  • Bright and shiny objects get dull with age, so are you sure you should really invest money into something that doesn’t have a lot of real value but is it necessary. Getting the bigger house, the nicer car, luxurious vacations because you believe you deserve it though it’s all being paid on credit based upon how well the business is doing at that moment.  If the bottom dropped out from your business tomorrow, how could you survive, including the employees and contractors who rely on you?
  • How often do you keep up with your receivables, since they are the ones that keep the lights on, or do you hope that a simple nudge so you don’t offend anyone will work and they’ll respond immediately. Most everyone does it, everyone gets some lead way, but you need to cut off the credit too.  Everyone keeps thinking that American Express used to promote a no spending limit idea, but there’s a limit on anything.  When someone reaches that limit, they usually will end up finding a way to pay for it by using another credit card or monies that come in so they can hold onto their reward points.
  • Believing in not using the full potential of your software you use for their business financial needs, because you don’t feel it’s not necessary nor worth the time to learn. There’s never been a client that hasn’t admitted that to me when we’ve done training, asked about follow up, and then they feel like it’s not worthwhile because they’re happy with what they learned.  Not knowing what the profit margins are, how to use cash flow projection templates, the inability to see if someone is doing the work correctly, this is what people don’t feel as being important because it doesn’t show up in their bank account.

Someone once asked me who controls a business, and they were surprised when I said the accounting department.  When they asked me to clarify my answer, I said that it doesn’t matter who is the face of the business or selling the services/products.  If the money isn’t counted right, proper documentation showing an accurate financial picture in determining how best to proceed on purchases, advertisement, and shareholder distribution, then it’s “the blind leading the blind.”

Dwayne J. Briscoe

Working During Limited Cash Flow

All start-up businesses, as well as well-established businesses, deal with limited cash flow at one time or another, and a lot of times there’s no way of being able to prepare ahead of time for it unless you have some set boundaries when you’re trying to figure out how to get through the rough spots without failing altogether.

  1. One of the biggest fails business owners feel is that they need to spend money in order to make money, but unfortunately a lot of times that’s not always the case. Often there’s no guarantee that this idea will work and then you’re often in a deeper hole than when you first started.

As an example, I was personally exploring an ad-based review service that used pay-per-click advertisement rates, and while the sales rep was demonstrating the site to me, they told me that as soon as I put in my credit card information to make a commitment, they would give me a discount code.  When I refused and explained I first needed to determine how much of a financial commitment I could make for advertisement, as well as exploring what other companies were doing and if my market audience was who I would target, they persisted until I finally hung up.  I don’t fault them for their drive, but it needs to be beneficial to my needs and not just how much they can collect.

  1. When was the last time you had an idea as to what your business loan(s) status was and if the possibility of renegotiation was available? I’ve personally worked with numerous clients who felt that they needed to take what was offered to them and should just leave well enough alone.  Or another reason is that they didn’t want to seem needy or desperate, so they would just find other, more risky alternatives.

A former client took out a loan once and when I calculated the loan’s interest, it was a whopping 48% they ended up paying.  Why did they get something to what seemed so ridiculous?  They thought that they needed it to get through a rough time they saw in the future, but that situation never happened and were locked into paying a lot of unnecessary monies when it could have gone to something more profitable.

  1. Where does loyalty lie when it comes to making sure your business survives? If you owe vendors, work with them and not just go silent hoping they’ll ignore you.  Work with your bank loan officer and keep them posted as to if you need some potential breathing room to help make ends meet.  And above all else, remember that relationships are your bread and butter so if you need to look at firing “the pretty one” because they’re costing you more than what they’re bringing in, then you need to do it.  You worked too long and too hard in order to not put your business’ needs first.

As business owners, we rarely have a day off to just breathe, because if you just expected to work 9-5, then it’s a matter of working for someone else then.  Because we work to have the flexibility and freedom to accomplish greater things, that takes sacrifice.  There’s always going to be lean days, which is what makes us appreciate the better ones.

Dwayne J. Briscoe