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Are you looking for ways to boost your cash revenues? Is your cash flow always
a problem to you? If you are always “cash strapped” consider the
following recommendations.
- Follow the money trail.
You won’t be successful in business if you omit to systematically track your
income and expenses as well as record those who owe you money and others who you
owe money to. Shoe boxes are for shoes, not for business records, so make
sure you have proper systems in place that enable you to assess at any time where
your business is at.
You don’t need to have big, expensive computerised systems. There are many
low cost programs available today that can do the job very well. Make sure
you have a system and/or software that will allow you to track every transaction
in your business, because without this information you will never know where you
are at, or in which direction you are going, or what you need to do to correct any
glaring problems.
Make sure all records are up to date, especially your cash recording system because
monitoring your cash situation will be critical.
- Be happy when you pay tax.
Most business owners are absolutely ecstatic when they find they don’t have
to pay any tax at the end of the year. The trouble with this scenario is that
if you don’t have to pay tax, it stands to reason you can’t be making
any profit. And if you aren’t making any profit, then why are you in business?
Too many business owners make decisions in their business venture based on the one
goal of reducing their business profitability so their tax is minimised. One
has to ask whether it would be far better to make a high profit and pay the tax
on it, because at the end of the day you will be left with a greater net income
and more money in your pocket after the Tax Man has taken his cut
For most small business owners, what the tax man considers to be profit in the little
business is actually the owner’s pay cheque. That profit is the net
income after all expenses, and this is used to pay the owner’s salary.
How many business owners work their heart out just so they can reduce their take
home pay cheque? No one, obviously. It doesn’t make sense. You
wouldn’t put up with this “reduction” from an employer, so why
put up with it now from your own business?
Never condemn yourself to a life of poverty just to avoid paying taxes.
It’s far better to make as high a profit as possible and then use all the
legal strategies and means available to you under the law to minimise the tax you
have to pay on that profit.
No one likes paying tax, but everyone likes making money.
The bottom line is this; if you are paying taxes, it means your business is making
money. So go out and make more money. Don’t let the thought of
paying tax hold you back. Remember, the maximum tax rate will only be a proportion
of the full dollar so you can’t lose.
For example, in New Zealand, the maximum tax rate is .39c in the dollar for an individual
and .33c for a company. For an individual, this means you are getting back
.61c in your hand for every dollar you make in profit. So the more dollars
you make in profit, the more .61c pieces will go into your pocket. That’s
surely a great result.
A word of caution: Don’t increase your profits only to end up spending
it all. Make sure you plan ahead for the tax on that profit. Remember,
the profit belongs in part to the tax man, so make sure you only spend the portion
which belongs to you.
- Make sure you get paid on time.
Always get your customers to pay on time. It’s no use doing work if
you are not going to get paid for it. Don’t extend credit unless it’s
absolutely necessary. As soon as the work is finished, send in your account
and if the account is not paid within the normal payment terms, don’t be afraid
to send a letter or statement reminding your customer that the account is due.
You don’t have to be rude or aggressive. Just be firm. Concentrate
your focus on preserving the relationship built up. If your customer or client has
legitimate complaints then don’t hesitate -fix the problems.
- Keep your customers close – and suppliers closer.
Look after the customers who have been with you from the beginning. They are
the ones who have stuck with you through thick and thin and they will be worth a
lot of money to while you are looking after their business affairs. If they
were not satisfied with your service they would have told you so long ago.
And as they are obviously satisfied with you, they will refer other businesses to
you regularly.
There is nothing wrong with looking for new customers, but don’t forget the
old ones.
Keep in touch with those old ones because they are often a great source of referrals
of extra business. It’s a fact that you can build a successful business
around a smaller number of satisfied customers by simply providing them with excellent
service and excellent products.
Loyal customers will always be “good money in the bank”. They are easier
to work with because they know how you operate and how you like things done.
It’s far less expensive to keep those old customers happy than it is to find
new customers.
- Watch and use your break even point.
The break even point is that moment in time when your income equals your expenses.
Once you exceed that point you are said to be making a profit. If your income
is higher than your expenses - that’s a profit. If your expenses are higher
than your income – that’s a loss.
Knowing your break even point is absolutely vital, because you must always be aware
how much it is costing you to produce the products or deliver the services in your
business. If your business is unable to meet its day to day costs plus financially
“support you”, you are not breaking even. Your system should be
able to highlight at any time the total number of sales you are making, their value
and the cost of generating those sales. It is only then that you will be able
to find out what level of sales you need to achieve to cover expenses and how many
customers you need to sell to, to meet your sales targets.
If you can’t reach the required income level, you may have to look at how
to reduce your expenditure. Make sure you fully understand what break even
is all about. It is in fact, a powerful business tool that helps you make
decisions about your marketing, go forward strategy, expansion, staff and prices
to name a few.
- Maintain friendships and don’t burn bridges.
Everyone has good clients as well as bad clients. Good clients always cooperate.
They are never any trouble. Bad clients are a continual “pain in the
butt”. They constantly moan and complain and are generally late in paying
their fees. Bad clients are always angry and annoying and they will blame
for any delays or mistakes at the “drop of a hat”. Good clients
take the time to treat you with respect. They extend manners and common courtesies
that one would extend to any other human being.
Let’s say both the good client and the bad client ask you for help.
Who are you going to “knock yourself out” for? - Obviously the good
client who treats you with respect. Is that fair? Not at all, but you
are being human.
Take the time to look after folk who provide you with your income. Build bridges
and establish relationships that last. The more satisfied and loyal your clients
are, the greater will be your cash flow.
- Work with budgets.
Most people are afraid or too lazy to maintain budgets. “Budgets are our friends”
is a saying often heard in the marketplace.
A budget is simply a plan. It helps you to stay on your pre-determined track
and focuses you on what you have to do to achieve something. If the budget
is a financial one, then the goal is a financial profit. If a budget is a
sales one, then it sets out how to achieve your sales goals.
Having a budget for your business could be the difference between piloting an aeroplane
with instruments or flying blind in a fog.
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