Every business has a voice which speaks to us daily. We must be acutely attuned and not just hearing, but actually listening. Don’t choose to ignore the red flags which could interfere with your green cash. Sharpen your listening skills so you’re able to understand with greater clarity, apply relevant information, and make better business decisions.
Perhaps your business is signaling to check your accounts receivable, or maybe you’re extending terms to customers but at the same time creating a cash flow gap. Terms can be inviting to acquire customers, but they can lower your profit if not managed properly. Some business owners opt for a line of credit to compensate for cash flow conflicts.
Although this helps to cover the cash, you could be increasing expenses in your overall model. Interest expense will reduce your profitability. Also, if your accounts receivables are not managed closely and collected promptly, this could lead to bad debt write-offs.
Another sound to listen out for is payroll expenses. Many times when revenue increases, it can be directly connected to an increase in labor. So it is important to make sure you don’t start adding labor just because the phones are ringing. It’s extremely important to calculate, monitor, and maintain your labor-to-revenue ratio. This will help you to hire people at the right time to ensure efficiency and sustain profitability.
OK, this is the final clarion call. The eighth commandment still serves as a guiding principle in business: Thou shall not steal. A university survey reported that 64% of small businesses have experienced theft. The most common item stolen was cash. Hmmm, not good. Proper internal controls are critical to help minimize your company’s vulnerability to theft.
Remember that your business is always communicating. Your ability to heed its promptings will leave you far better off in the short and long term. Accounting is more than numbers on a page, but it’s a barometer that tells the real story—fact, not fiction. Keep your eyes and ears on the numbers. At the end of the day, cash is King. And it doesn’t mean a thing, if it doesn’t go cha-ching!
Marquita Miller is the founder and CEO of Five Star Tax and Business Solutions— a full service accounting firm in Kansas City, Missouri. A small business expert contributor on CBS & FOX morning shows, Miller is a published author, business strategist, motivational speaker and well known advocate for entrepreneurship. A recipient of Kansas City’s Influential Woman and Woman Who Means Business award, Miller is also a conference speaker and workshop facilitator for TD Jakes Ministries. www.marquitamiller.com. Twitter:@MarquitaMMiller Facebook: Marquita M Miller