Although I admire the industry expertise of small business owners, I rarely meet one who truly understands Profit and Cash Flow. The focus always seems to be on acquiring more sales.
I have been there. The solution to a cash shortage is not solely increasing sales. You can and must remedy cash flow ills first at the current level of sales. This is necessary to improve profit for debt and operations, and cash surplus for growth, at any sales volume. You can do this quickly and easily, but only if you know the system.
Below is a general overview of the basics of the Profit and Cash Flow Strategies System. When executed, this system will alleviate your profit and cash flow distress.
1. Control all costs and expenses with a predetermined and fixed plan.
It is imperative to establish the amount of pre-tax net operating profit to pay for debt service, fixed costs, and other operating expenses. To arrive at the predetermined profit, the Profit and Cash Flow method provides control over all of the costs and expenses in relationship to a fluctuation in sales volume. Do not confuse this control document with a budget.
2. Analyze your market competition and customers.
Trend analysis is an active financial management process too. It differs substantially from the traditional accounting cash flow statement frequently included with reports provided by an accountant or accounting software. Accounting-based cash flow statements are a recording of historical sources and applications of funds. Alternately, strategy based on the Profit and Cash Flow system presents cash management analysis and control alternatives.
3. Predetermine your systems for cash flow, operations, and sales plans.
A properly developed and maintained Profit and Cash Flow planning system is the basis of sound cash management. A spreadsheet planner that I created can provide decision making data to determine which payable to pay, which to delay (and until what date), and when excesses or shortages of cash will occur. When combined with my Deviation Report System, you can enhance the level of additional control triggers for the next period’s variable expenses. This will help you avoid cash shortages.
4. Harvest your profit and cash surplus by focusing on your processes each day.
Using a predetermined plan to control the near term profit and cash performance of your business will produce the harvest of operating funds, debt service, and cash surplus you desire. You will soon have a level of confidence in operating a business that produces profit and cash surplus, true growth, and expansion.
5. Don’t go it alone.
Get a coach for accountability. Don’t let another year go by in which you operate in the same way, but expect different results.
You must perform all operations and systems with the understanding that these functions relate directly to the first line of expense—Profit. The choice is yours. Either manage the Profit and Cash Flow, or let the Profit and Cash Flow (or lack thereof) manage you.
To get more information and receive other no-cost special audio downloads, reports, articles, blog posts, and more, visit Ron Hequet where I cover valuable topics that every person wanting to grow their business or career needs to know. And, if you’re ready to take your business to the next level, get a free assessment from me personally at Free Business Assessment or for those wanting to build your career go to Complimentary Coaching Assessment.