Is there a constant struggle in your business to keep the cash flowing? Do you feel that you’re doing well but you still don’t seem to have the money coming in?
Then it may be time to do a quick financial review.
- Print off the list below.
- Get two highlighter pens, one green, one pink.
- Go down the list and highlight each question – green if the answer is yes, pink if the answer is no.
- Follow the instructions at the end of the list.
- Are most of your outstanding debts collected within 1 month?
- Are you billing people promptly?
- Do you have enough cash in the bank?
- Have you reviewed all your costs within the last three months?
- Have you taken action on that cost review?
- Do you have good, long standing relationships with your suppliers?
- Do you have a budget?
- Do you review that budget every month?
- Do you do regular stocktakes?
- Are your stock levels staying level of falling?
- Have you communicated your plan and vision for the future of your business to your team?
- Have you included the financial plan in that communication?
- Do you do quarterly management accounts (either for yourself internally or to pass to your accountant)?
- Do you compare your quarterly and annual performance against previous data?
- Do you produce a monthly cash statement?
- Do you monitor key performance indicators (such as debtor/creditor days, stock held, gross profit margins, break even point etc)?
- Do you have a regular, open and honest relationship with your bank manager?
Count up the number of green to pink (or just look at the dominant color if you can’t bear to count them!).
Predominantly green? Good on you, your financial shape is pretty good so the problems may be elsewhere in the business.
Pretty even? You can probably up your profits and cashflow quite quickly by looking at a few of the pink areas. Chose three a week to deal with until the list goes green again.
Predominantly pink? Hmm, may need quite a bit of work doing here…
Even if you come out 100% green in this quick check (and I’m willing to bet 99.9% of businesses will not, so don’t worry if you have a few pinks in there!) I’m sure there will still be some areas that you need to go back and review or tighten up on. If you’ve got pinks then now you know where to look as the areas of weakness will have been highlighted.