Just think about it: you can come up with a new idea for a business that you are passionate about. You get excitedly busy implementing your idea, trying to break into a highly competitive and crowded market. The idea you started with doesn’t seem to be working as well as you thought it would and through innovation you get things on the right track. That’s what every rookie entrepreneur wants to see and experience – their initial business idea transformed into a viable product or service, making money for them and their family.
Realistically though, the inevitable problems and challenges start to mount. There are many people who sit in smoke-filled rooms (or these days stand out on smoke filled balconies) plotting and scheming of ways to throw rocks in your path. It could be the draconian threat of business licensing, spiteful taxes and harsh labour laws that throttle any possibility of the flexibility in your staffing for growth.
Not every business or small business faces the same set of obstacles. But astronomical energy costs, greedy landlords and way over-priced media space make it harder and harder to do business.
But wait there’s more. Customers hemorrhaging from the uncertain economy suddenly start getting antsy about paying you on time and play their little games to avoid paying you at all – because their cash flow is under pressure.
For businesses that run or sell strictly on cash this isn’t a problem but for those who grant credit it is. Customer whose line of credit is being extended to the absolute limit, look at their suppliers and start tightening the screws on payments.
Worst of all, are those customers who refuse to pay and find every excuse under the sun from shoddy work to incorrect invoicing to get out of paying you. And if you’ve been perhaps too aggressive with your customer acquisition, you may find that you land up with the unthinkable – bad debts. If your customer still has a going concern, you can hand over the bad debt to a debit collection agency. But if your customer has gone bankrupt, you are going to stand in a very long line of creditors with employees and banks first in line.
I may have painted a bleak picture but with the increased number of insolvencies the outlook for small and medium-size businesses is worrying. It pays to plan for business risk, especially financial risk.
It’s hard enough planning for all the nasties that may confront you in your business and I’d be certainly the first to admit that even after running small businesses myself I don’t have all the answers.
But what I do have is a sound way to keep your cash flow healthy through smart cash flow forecasting and management.
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Stay inspired
Chesney Bradshaw
