We all love to know how our business measures up, but it’s hard to get information about what good cash flow looks like, and to know how well we’re really doing.
Too many businesses believe that tight cash flow is just a way of life. But this isn’t true – tight cash flow means something is wrong; that there isn’t enough cash in your business. That’s ok, because knowing there’s a problem is the first step in fixing it.
How many of these can you answer “yes” to?
- Does your business make a good level of net profit ? (At least 5 – 10% after tax and dividends)
- Can you always pay your suppliers on time?
- Can you plan ahead with confidence?
- Do you have your VAT and corporation tax put away, so you can always pay HMRC on time?
- Do your customers pay you on time? (or do you have a tussle every month?)
- If your biggest customer didn’t pay you on time would cashflow still be ok?
- Have you got a cash buffer of at least 2 months overheads?
- Have you got the money you need to grow your business?
- Does your marketing deliver consistent sales, meaning you have confidence in future cashflow?
You might think these are pie in the sky, but I promise you, this is what great cashflow looks like, and is how the strong companies run their cash.
If you didn’t manage to answer yes to all of these, then it’s worth looking at, and really understanding why your cash flow isn’t as strong as it could be, and what you can do to start making some changes.