Are you struggling with cash flow problems in your business? Let’s talk about the best practices that can turn things around!
I firmly believe that solving cash flow problems is 80% behavior and 20% knowledge, coupled with the right tools. In my extensive experience of over 30 years working closely with business owners to manage their cash flow, this formula has proven to be true time and time again.
But what exactly is a behavior problem when it comes to cash flow? Well, one typical issue is spending more than the company brings in on a consistent basis, often relying on credit debt. And it’s not just the spending, it’s the questions we ask ourselves when we find ourselves in this situation.
It’s time to start asking better questions and getting better answers.
When confronted with debt, for example, most people will ask themselves, “Why can’t I get out of debt?” And then they start coming up with all sorts of excuses and justifications for their situation. They’ll tell themselves stories like, “I had to buy that thing because…” or “I had no choice but to take out that loan because…” all while continuing to spend using credit.
But what if we changed the question? What if we asked ourselves, “How can I get out of debt?” Suddenly, our mindset shifts towards finding solutions and taking the necessary actions to achieve our goal.
I recently came across an article by Michael F. Kay on Forbes, titled “Nine Steps To Turn Your Money ‘Shoulds’ Into Action,” and it resonated with me. Kay emphasizes the importance of asking and answering the question, “What MUST I do to accomplish the goal?” This provides clarity on the actions that need to be taken. And when it comes to planning and executing those actions, good cash flow management tools like Cash Flow Mojo® software can make a world of difference.
Let me give you an example of how asking better questions can lead to better answers and, ultimately, effective actions.
Consider the question, “How can I be sure that the piece of equipment I want to buy will pay for itself and generate a good profit in the long run?” A possible answer could involve addressing current and potential customers directly. Ask them if they would purchase what the equipment produces, how likely they are to order it repeatedly, and how much they would be willing to pay. Seek insights from colleagues in non-competitive areas who have similar equipment and understand how it has worked for them. Additionally, look into why others might be selling the equipment, as that can also offer valuable insights.
Now, let’s explore a few more questions that business owners can ask themselves when tackling cash flow issues.
Question: How can I increase my income?
Example answers: Promote more. Raise prices. Add guarantees to make purchasing more enticing. Introduce new, profitable services or product lines. Set sales targets and quotas for the sales team. Bundle slow-selling inventory with high-profit items and run a special to liquidate the old stock for cash.
Question: How can I reduce expenses?
Example answers: Shop for suppliers with lower prices. Minimize discretionary spending on meals. Implement a bonus plan for staff instead of annual salary increases. Establish strict budgets for office supplies and inventory. Opt for cash payments instead of credit cards.
Question: How can I pay off my debt?
Example answers: Use a debit card instead of a credit card. Stop relying on the credit card and focus on aggressively paying off the debt. Avoid taking out loans to pay off old debt, as it just creates new bills. Instead, cut expenses and increase income to have more cash available for debt repayment.
You see, asking better questions ignites the brain’s creative problem-solving capabilities, shifting the focus from generating excuses to finding practical solutions. Delete the “Why can’t I…” questions from your mindset, and you’ll discover a wealth of workable strategies for solving cash flow problems.
Remember, solving cash flow problems is a combination of behavior, knowledge, and the right tools. Let’s implement these best practices together and navigate the path to financial success!