Cash Flow Worries: How to Cope With Them – DHKN Galway

Cash Flow Worries: How to Cope With Them

Cash Flow worries ca lead to sleepless nights

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Some tips on how to manage the stress

By Dave Hickey

A few years ago, I interviewed business leaders from a wide range of businesses and backgrounds for the local newspaper.

One CEO of a fairly recent start-up was talking about managing cash and struggling to meet payroll every month.  He told of some months when there wasn’t enough cash to pay staff and himself, so he did without.  He produced a bundle of loyalty cards from local coffee shops which he used to keep him fed during the working day until cash came in from customers.

Another CEO, who spent the working week in the city before returning home during downtimes, told me of the weeks when he couldn’t pay himself enough to eat a decent meal every day, so he waited until he got home at the end of his week to eat properly.

“You don’t realise when you start your business that cash flow can be your biggest worry, because your business doesn’t develop in line with your financial plan.”

Neither had direct financial management experience before starting their businesses but it would be no guarantee of an easier life if they had.

I’ve had over 30 years’ experience in senior finance and CEO roles, and I’ve also lived the experiences above along with the sleepless nights and the anxious juggling of payments to suppliers, Revenue, etc.

A few tips for helping to reduce the stress – and damage to your health – caused by cash flow concerns; something that happens to most business leaders and entrepreneurs at some stage.

Have a Plan and be ready to adapt it.

Prepare regular cash flow projections – weekly or daily if necessary.  Few projections turn out as planned, so be prepared to change them as you learn from experience.  Don’t cling to the original hoping it will come to pass.  Adapt to survive.

Track Cash Flow Every Day

Make sure you monitor cash at least weekly, but daily if you can, using your bank’s online service together with your own records of what’s due to be paid or received and when.

Early Warning System

Focus on the one or two measures which you can track daily which might give you early warning if something’s not on track.  It could be footfall, site visits or conversion rates.  Know what you can do to address the issue if needed.

Reduce Cash Conversion Time

If you generate invoices for goods or services, make sure this is automated as much as possible to reduce the time between delivery and invoicing.  A day can make a big difference, so make sure those invoices are dispatched on time and electronically – not by snail mail!

Discounts & Incentives

Offer incentives for early or prompt payment.  These can be in the form of vouchers for future purchases rather than cash.  Ask suppliers for discounts if you pay them on time.

Under Promise & Over Deliver

Talk to your bank and to Revenue.  Let them know if you foresee a problem and that you have a plan to deal with it.

If you predict late payments to them, let them know and when you expect to be back on track. Aim to deliver earlier than forecast (only slightly).  You never know when you’ll need their support again.

Get support from your advisers

Financial advisers are there to support you but start-up or scale-up businesses often can’t afford to consult them regularly.

The better advisers offer outsourced accounting and financial oversight services which take away a lot of the admin work required to stay on top of the numbers – leaving you time to focus on what you do best: growing your business.  They can also help with analysis and advice based on your experience and goals.

Cash Flow can be a real worry at any time. Being prepared for it and having a plan that you can put in place to deal with it will help reduce the stress on you and your leadership team.

For more information contact me at dhickey@dhkn.ie

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