In every business, if you do not manage your cash flows well, you will eventually be out of business. It does not matter how great your customer base is, how essential your services are to the people, if they do not pay you, you will not be able to continue rendering the services. Even pyramid schemes which seems to be attracting a lot of youngsters that are into get rich money quick schemes only survives for as long as there are new initiation fees. Without new joiners, the cash to pay old guys dries up and the business disappear into thin air.
Cash flow management is very simple. For those that had accounting in school, even though the cash book was the hardest thing to balance back then, it is actually very simple if you think about it. What is the money that came in and what is the money that came out? If you keep a record of all the money that you receive and all the money that you spent, you will know at each point in time how much money you have.
However completing a cashbook is not what is going to save your business. This is because a cashbook is a summary of events that has passed. You could be busy recording what came in and out until such as time that you realise that there is actually no more money for you to spent. At that point what do you do? After all, there is only so much that you can spend.
In order to get control of your finances, you must do the following few things:
1. Establish a plan– Have a budget of how much money you can expect to receive and how much money you expect to spend. If you have a small business, extend this to a few months. How much stock , machinery , suppliers and tax authority will you need to pay or buy? How long will your current bank balance last before you have troubles paying your employees? This will help you if maybe you should go aggressive on your marketing plans to get new business that will bring additional cash, or you might have to negotiate with your suppliers to give you credit or approach your bank for an overdraft facility.
Applying for funding takes time so if you go last minutes you might end up disappointed.
2.Record what actually happens and assign responsibilities. It does not help if you have a great plan but you do not put into actions. If you only expect to pay N$10 000 in salaries and no one controls the overtime being worked by employees, you will soon be paying out N$15 000 as opposed to what you planned. One of the reason why personal finances get out of controls is because there is no one to keep you accountable to the plans you make and there is no one to approve any spending decision. Unless you stick to the budget and have people hold you accountable, you will be wasting time with drafting point 1.
3. Finally re-assess and adjust when necessary. Things change daily and do not always go as planned. Just when you think you’ve got everything in order and you hear ” your grandma swallowed a blade up north and you need to send N$5000 for her to go for an operation” ( just joking, it was meme that led me to writing about black tax). Or you tire burst or you simply forgot to budget for your car license disc that is due for renewal? In events like this, things cannot to continue as normal, they must be adjusted to reflect the reality.
The most simple things are the hardest to implement. Think about why you ran out of money last month? Think about all the business ideas that you started only to realize that you actually do not have enough cash to complete the project? But most importantly, start tracking your expenses so you can understand where your money is going and start diverting it to where you need it to go.
In conclusion, we are excited to bring you yet another episode of The Wave. Our next guest is an entrepreneur who owns a fabric supplies business , supplies incubators to up coming poultry farmers as well as own a travel agent company ( Lazilia Travel ) . In her 8 -5 , she is defying gender conventional roles being a bad*** Quantity surveyor .