Over the years we’ve worked with hundreds of business owners from a wide range of sectors, and it’s very interesting how many times we find the same gaps in the way they operate. The basics are often missing – even in those businesses that are performing well.
To help you identify and overcome these gaps in your own business, we’ve compiled the ‘Top 9 Profit and Cash Flow Killers’. Take time to read through them and think about how many of these common mistakes you are doing in your business.
1. There is no consistent review of the Profit & Loss Report, Balance Sheet and Cashflow Forecast on a monthly basis. In many instances, owners have not reviewed their Profit & Loss Report to look at trends or opportunities to improve. Segmentation or Customer profit reporting is unheard of.
2. There is no cash flow management and hence little understanding of what levers to pull to change the cash balance in the bank. Often, profit does not mean extra cash and if they are growing, cash gets tighter, but they don’t know why.
3. There are no systematic processes to manage Accounts Receivable and Inventory. This usually leaves hundreds of thousands of dollars locked up, and this can often lead to large losses.
4. Business owners are looking for the one big saviour, when in fact little improvements in 7 key areas can yield significant benefits.
5. There is no Budget or Forecast prepared. This aspect is so important , yet it is nearly always overlooked. A budget should not just be an extrapolation of the status quo, it should also be a well thought out view of what the next year could be, and the actions that will help you get there.
6. There is a lack of financial clarity – bookkeepers and tax accountants do not provide financial information that is useful to running the business.
7. Owners spend very little time on strategy and often say they are too busy for this. Owners are self-employed, and not running a business. I.e. they are ‘working on the tools’ too much.
8. Controls are often lacking , leaving them open to fraud, leakage, or just wastage.
9. There is no ‘Exit Plan’ or readiness. This in turn means there is lots of untapped value still left in the business.
Each of these points are important, but even more important is to have a regular business coach or mentor that can help you prepare value added information, and at the same time provide experience and guidance in driving ongoing performance. Each business is different, but fundamentals are the same.
Now for the solutions!
The first step to overcoming these challenges is to understand them. Click here to download our eBook ‘The Top 9 ‘Profit & Cash Flow Killers and How to Overcome Them’.