Positive Cashflow is KING! How many times have we heard that statement and to be fair, it is logical, easily understood but somehow it still seems to be the bain of most businesses. To put it in context, I am mainly referring to SME’s (small to medium size businesses). Larger companies (private or listed) have greater resources to manage the cashflow strategy and balance sheets to obtain funding if required. A study in the US found that up to 82% of start-ups fail owing to cash related issues (read bad cashflow management) effectively only 1 in 5 businesses are managing their cashflow.

So how does this simple concept (cash in/cash out) seem to allude the business owner? Like everything in life it is not that simple. Firstly, most entrepreneurs and business owners have taken the plunge as they can offer a unique skill/service/product, let us call it their USP (unique selling point) and a majority of their time is promoting their business. Unfortunately, it comes with the expectation that their clients will pay (on time) and that they have the internal structures within the business to manage it (usually they take it on personally). Unfortunately, they do not take into account the type of business they offer e.g service or product, begrudging or aspirational purchase, the types of clients they have on their books and how those clients manage their cashflow and lastly, an efficient internal structure to manage their cashflow and debtors book.

Having gone to many conferences with many SME business owners, it always surprises me that so few have allocated resources to managing their invoices, debtors book (read debt collection) and cashflow. Though with that in mind, a SME is always constrained by lack of resources and what makes being a business owner exciting and terrifying at the same time.
I thought it would be interesting to write on areas that are not the usual areas highlighted by other cash-flow crusaders. Over the next few blogs will discuss: types of business the company offers, the clients the company takes on and finally the internal structures of cashflow management. Within each blog, I will highlight lessons which I have learnt either directly or from indirectly from individuals who have told me their story.

Unfortunately, before you can analyse any of this information you need to make sure you are recording your sales and know who is on that debtors book. Lesson #1 – make sure you have an easy accounting system (preferably cloud-based) which allows you to know what you have sold and who is on your debtors book.
If you seem lost and need any assistance with your cash-flow management or debtors management query, please contact Alison@debtorsolutions.co.za

Article written by Jason Cooper