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BUSINESS  FEATURE


















           MANAGE YOUR CASH FLOW




           AND GROW YOUR PROFIT





           In business it’s not uncommon to have millions of rands worth of turnover without
           generating adequate cash flow to support business growth.  It’s a well-known fact
           that growth in any type of business consumes cash, which according to Verne
           Harnish, is the first law of entrepreneurial gravity.



           The three laws of entrepreneurial gravity according to Verne are:  •  Stop saying that we are a seasonal business and “it is just the way
           1)  Growth eats cash – a growth business is hungry for cash  it is”. Know your turnover break-even point and ensure you hit
           2)  Buy low and sell high – ensure you buy right so you can achieve   that number every day, every week, and every month.
             the gross profit margins that can sustain the business  •  Run  your  available  cash  report  daily  –  and  understand  why  it
           3)  Visibility equals credibility – your business must be visible, and this   has changed.
             brings credibility and profitability.              •  Manage your cash gap - increase supplier payment terms and
                                                                 send your invoices out quicker, don’t wait for month end.
           So, what is entrepreneurial gravity?  This can be defined as “those   •  Understand  customer  payment  cycles,  especially  at  year  end
           unavoidable forces” that draw on a business owner or entrepreneur.   and time your billings accordingly.
                                                                •  Shorten  product  and  service  delivery  cycles  –  measure  your
           There is a saying in business that states: “Turnover is vanity, profit   work-in-progress.
           sanity and cash is king” and if you are serious about fixing your cash   •  Get key customers to pay sooner or implement a COD policy.
           flow, I suggest that you read Alan Miltz’s Cash Flow Story or Instant   •  Reduce your fixed costs – most of the businesses I start to work
           Cash Flow written by Brad Sugars.                     with can reduce their expenses and cut out some ‘nice-to-haves’.
                                                                •  Don’t  replace  your  staff  resignations  immediately,  critically
           So why is the management of cash so important? Well, think of it   evaluate the need for the role and whether it can be automated,
           this way: cash is to a business what fuel is to a car. If you run out of   eliminated or re-allocated amongst the team.
           fuel, the car stops. It must therefore be your primary business goal   •  Get  customers  to  pay  a  deposit  or  bigger  deposit  when  your
           and focus as a business owner to keep fuel in the car or a healthy   business has a long manufacturing cycle and high cost of goods
           cash flow.                                            sold.
                                                                •  Brainstorm  three  ways  to  immediately  reduce  your  cash  cycle
           Yes, you can have a company with a healthy profit and still run out of   and increase your operating cash position.
           cash, because cash flow is the sum of income and expenses realised.
                                                                Now is the time for action! Remember nothing changes if you
           Do I need a cash flow forecast?                      don’t take action.

           You certainly do!                                    If you would like the support of a business coach on your path to
                                                                managing your cash flow, we are happy to help.
           Your  cash  flow  statement  and  forecast  differ  from  an  income
           statement because it tracks the actual flow of money into and out   To learn more about building a commercial profitable enterprise,
           of your business.                                    contact me on 082 320 6072 or send a private email to
                                                                bertweenink@actioncoach.com
           It starts with your ‘beginning’ cash – money in the bank, add to it
           your receipts or funds that come into your business and subtract   I invite you to attend one of our training webinars.  Go
           disbursements,  funds  that  flow  out.  You  will  then  either  have  a   to www.bertweenink.com and check out my upcoming
           cash surplus or a cash deficit. Remember your accounting software   webinars or email me at bert@bertweenink.com  for
           should be able to give you that picture.               details on our next training webinar.

           It  is  possible  to  dramatically  improve  your  cash  position  whilst   Yours in business,
           growing your business and here are ten things that you can do or act   Coach Bert
           on to improve your cash position.                                                                   n


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