No matter how successful you are in business, it is a fact that you will have cash flow problems at one time or another.

In his book ‘Screw it, Let’s do it’, Richard Branson candidly tells the story of having to sell Virgin Music to EMI for half a billion pounds in order to keep Virgin Air afloat.  The degree of your cash flow problems is all relative.

If your business is in growth mode, no matter how well you plan you are sure to encounter cash flow problems because growth costs money.  In fact growth gobbles money up; new staff, new equipment, bigger location, etc. etc.

Managing cash flow is pretty easy when we have money. When our bank balance is healthy we pay our bills.

It is when there is no money in the bank that managing cash flow is more difficult.  We wait for cheques to arrive. We put purchases on credit cards and suppliers call asking for payments. We become more and more distracted because there is no money and we really don’t know when there will be. We lie awake at night; we fret. We find it harder and harder to focus on our prime responsibility; growing a successful business.

When you find yourself in the “cash flow challenge”place, don’t ignore the bills.  They will haunt you; even if you hide them in a drawer you will always know they are there!   You need to face the brutal facts and start to manage the situation.

There are ways to gain control.  Cash flow management is possible.  Here are some actions you can take:

1. Accept payment by credit card.  Clients like to collect points and you are making it easy for them to buy.
2. Invoice regularly and more frequently.
3. Offer installment payments.  For example, monthly or 1/3, 1/3, 1/3.
4. Lease equipment rather than buy.
5. Negotiate a slower repayment schedule for your payables for a short term.
6. Manage the money in and money out by using the following spreadsheet.

Open up a blank spreadsheet and title 5 columns as follows:

Column 1 ‘ Money Out

Column 2 ‘ May (i.e. this month)

Column 3 ‘ June (i.e. next month)

Column 4 ‘ July

Column 5 – August

In column 1 enter the names of all the people (don’t forget you!) and companies and governments you owe money to and in the appropriate columns enter the full amount that is to be paid (including HST).

Now continue to list in column 1 all those you know must be paid sometime in the next 4 months but you have not or will not receive an invoice. For example, HST or car loan payment.

Leave a couple of rows and enter another heading for column 1 ‘ Money In. You’ve got it! This is where you will list outstanding and expected future invoices and when you expect to be paid. With this final step you have a clear picture of your future cash flow. You may not like the answer but you now know and knowledge is all powerful. You can now make proactive cash flow decisions and get back to what you should be doing; which is building a successful business.

Action for this week ‘ do your Four Months Cash Flow Projections as outlined above. If you want an Excel template email nick@yourplanningpartners.com.

Let’s have some fun around money ~ http://www.youtube.com/watch?v=rkRIbUT6u7Q