The start of the year is a good time to tighten up on cash – but its much more effective to do this before the start of the year. That way you will hit the new year running! So why not use some of that xmas downtime to look at these areas:
1 Give your personal budget a makeover – the less you have to take out of the business to fund your lifestyle the less pressure you will be under. Here is a great budget spreadsheet courtesy of moneysavingexpert.com
2 Do you have too many projects on the go? If so, you may suffer from lack of focus. Nick Roberston founder of ASOS said recently: “no one goes bust through being too focused” . Your key limiting resource is time – so don’t spread yourself too thin.
3 Do you see regular management accounts? A lot of businesses just get annual accounts six months after the year end – what good is that. Good management accounts should be out quickly after the month end and will show you how you are doing and highlight areas that aren’t working according to planned assumptions.
4 Documentation – More cash is lost through lack of documentation or poor documentation than any other reason. If there are important agreements that aren’t in writing yet – get them in writing!
5 Sales forecasts – most business plan unravel because the sales target is unrealistic – usually not in the level of sales but how quickly it is assumed the business will ramp up. Also the forecast is a wish rather than based on some kind of assumption eg number of sales calls which lead to y% meetings which lead to x% sales.
6 Intellectual Property – virtually every business is dependent on its IP for competitive advantage – make sure you understand how this area works. If in doubt there are some great resources at the British Library.
7 Managing Working Capital – working capital is money owed to you by customers, plus money tied up in stock less what is owed to suppliers. You can have a fast growing profitable business that comes unstuck because it runs out of working capital. So take time over the break and review how you chase outstanding debtors – do you have set procedures that are always followed? eg puuting accounts on hold when terms are exceeded? And also have a look at stock holding – do you carry too much stock.
Taking time to look at these areas shouldn’t spoil Xmas and will generate much needed funds for the “bleak mid-winter” – but please try and make it part of your regular weekly and monthly routine next year.