Before the great tragedy in False Bay when foreign fishing vessels were allowed to trawl fish before they reached the bay, my father, Brian, ran a ski boat for sports fishing in the bay. In those days in the early 1970s the bay was teeming with fish. At times there were acres of yellowtail, bonito and snoek that entered the bay to feed and spawn.
My father covered the costs of running his ski boat because he had been fishing for many years and was able to come back with reasonably sized hauls. Even though the price of fish was low in those days he was able to pay for petrol costs, licence fees, bait and tackle purchases, maintenance and repair of the Land Rover, boat and trailer and purchase odd new equipment such as a fish finder. A big cost that had to be covered was when he took the boat out into the bay and caught no fish. These fishing trips had to be financed from any surplus from previous good catches.
As fishing stocks declined because of over catching by commercial fishermen and the giant fishing vessels, it became harder and harder to make a good catches from his ski boat. Fishing trips were less frequent and it often was a hit-and-miss affair. His skills in fishing then turned to finding out where and when the fish were biting to increase the odds of striking it lucky. With increased precision in locating catches it was possible to keep operating the ski boat but you had to be sure that there was a high probability that the fish would be biting on a particular day.
Managing your cash flow whether it is in your personal life, a hobby such as sports fishing or a business has similarities. Yet if you get control over your cash flow, you can prepare yourself for slow periods, increases in costs and eliminate inefficiencies.
Typical advice for start-ups and small businesses is to first do a profitability check to see that your business is making a reasonable profit. You’ve got to analyse each of your products and services to see whether they are priced correctly and whether they are earning their keep. It’s little use chasing sales unless they are profitable.
Cash flow projections whether they be daily, weekly, monthly, quarterly or yearly, help provide an early warning system for cash shortfalls. A cash flow projection helps you anticipate slow periods so you can act promptly.
A basic way to re-energise your cash flow is to get money into your business more quickly. You can send out invoices more quickly, request customers to pay via EFT and even charge interest to slow-payers. Where possible, it makes sense to charge customers upfront in full or at least secure a 50% deposit. If the customer refuses, you can be almost guaranteed that you are going to have payment problems with this so-called customer.
Another way that small business owners improve their cash flow is by releasing their cash tied up in the business. Cash can be trapped in your business in inventory or unused assets. Offering discounts on dog lines can increase the odds of getting them out of your store or warehouse quickly.
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