What is Cashflow?

What Keeps YOU Up at Night?

When people ask me what I do for a living, I used to tell them I’m a tax specialist (yawn), then the more blunt response from them would be “so you’re an accountant then” (double yawn) which is an almost immediate conversation-ender. But nowadays I say something else, something which is far more interesting and at the very least, manages to get across what we actually do before the yawning kicks in.

I tell people that I help business owners sleep at night.  I take away the stress and the worry, give them time back with their family, and help drive a way forward so they actually start to achieve the dream they had when they went into business for themselves in the first place.  I help them back onto the path to success and give them back their lives.

So, tell me if this sounds familiar:

You run a business which, on the face of it, is doing well.  You have plenty of clients who value your work, return repeatedly, they refer you to their friends and associates, you win new work, have a team of people in your office who, aside from the usual headaches, are all trained well, work hard and overall are a great asset to your business. 

But you don’t sleep at night stressing about how you are going to pay them, let alone their super.  You worry whether you will be able to pay the Australian Taxation Office (‘ATO’), you never seem to have enough cash in the bank and you spend your life worrying about the proverbial knock on the door from creditors.  It’s feeding into your family life, as often there is not quite enough money in the bank to pay yourself your salary, your stress levels mean you don’t have the patience you need for your children and you end up working all hours to bring revenue in the door to make ends meet but in so doing, you don’t see your kids or your partner who is also beginning to tire of this cycle.

This is just the life of a small business owner right?  Wrong.  You didn’t take all that financial risk and hard work to set-up the business just to spend your nights lying awake wondering how you are going to pay for everything.

Cash.  It may not be fashionable anymore as we move towards an ever-increasing digital society, but it still governs the health of a business.  When it’s slow to come in, it can very quickly lead to very big problems.  This can be an especially big problem for professional service firms such as lawyers, veterinarians, accountants and engineers. 

For many professional services firms the product delivered is undervalued by clients who whilst appreciative of our work, struggle to understand it’s value, let alone the time, knowledge and skill which goes into it, and as such take their time to pay.  To put it mildly, it can lead to many of us having many sleepless nights as the strain is taken on the business’ cashflow.  Compounding the problem is time.  Billing clients can take a lot of time as we scrabble to create a bill which justifies the fee we are very apologetically handing them and as owners, it’s often left to us to make sure this piece of undervalued art is done correctly.  This means that not only is the billing often left too long before being handed to the client (who by the stage they receive it have forgotten the appreciation they felt at the time of the completion of the work), but it means the busiest person in the business is either taking time away from their family or other valuable work to do it.

To be clear, today’s article is not here to go into detail around how professionals often under-value their work and as such under-charge their clients (although pricing is a key aspect of any healthy business).  But what if I told you, that this doesn’t actually have to be “just the life of a small business owner”.  There are ways to make sure the flow of money into and out of the business is regulated such that sleepless nights become a thing of the past.  And no, I’m not trying to sell you a new software to do it for you.

Regularly checking the key metrics of your business which includes things like your billing cycle, debtor days, creditor days, ratios, budgeting, benchmarking, cashflow forecasts (I can feel the yawning beginning to start-up) are just some of the ways a business can check on it’s cash health – at least monthly.

If you want to know how, reach out, we can meet over a coffee (virtual or in-person) and you can share with me your concerns about your business and maybe I might be able to help.

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