Money Matters!

Your money mindset is your unique set of beliefs and your attitude about money. It drives the decisions you make about saving, spending and handling money. When it comes to running a business your money mindset is critical to its success.

According to Marc Pearlman of the Entrepreneur Europe, the latest statistics from the Small Business Administration (2020) show that new businesses have a 50 percent chance of surviving five years or more. While this dispels some longstanding beliefs that 95 percent of businesses fail within five years, the odds of success are still the toss of a coin.

 Common factors contributing to business failures include insufficient capital, poor cashflow management and lack of planning and credit control, to name but a few…

 For this blog post we will focus on the money elements, namely:

Why is Cashflow Important?

Cash is the lifeblood of any business

Run out of cash – run yourself out of business

Insufficient cash – no money for reinvestment and growth

Everything becomes stagnant and difficult

Why do business owners get it wrong?

Avoidance Mindset:

Think hard work equals Profit – it doesn’t

Fear of the numbers – it’s not their strength

Think it’ll be too difficult and complicated

Execution:

Failing to plan and forecast

Go into too much detail too soon

Don’t look at their numbers – often enough – or with insight

Poor invoicing and credit control

Solution:

Every business – including yours – needs a budget – a Plan for Profit

If you don’t have a plan – success is far less likely - it rarely happens by accident

Simple sales targets + simple expense budget = plan for profit

You need a Cashflow Forecast:

On a spreadsheet - Identify where in the year your cash will be in surplus or at risk

If you don’t know how – ask a friend or expert for help

Start – and keep it – Simple!

Keep the numbers simple and approximate

Make it no more complicated than you can follow and understand

You can make it more detailed over time.    

You need Credit Control:

Whatever your forecasts, if you don’t get paid, you’ll have no money in your bank. – Simple!

Agree preferable payment terms in advance - the shorter the better

Invoice promptly

Remind politely and swiftly when payments are overdue