Profit First Cash Flow Management System
When cash flow is tight, do you find yourself putting a band-aid on the symptom instead of trying to find the root cause, trying to dig a little bit deeper?
Short Term Fixes
There's a variety of reasons why we could have short cash flow. Regardless of the reasons, oftentimes the two common responses from small businesses are…
… take out money in a loan, whether that's directly at a bank line of credit on your house, or simply increasing your credit card balance by putting charges on the credit card but not paying it. All of those are forms of borrowing money, which then increases the interest expense that you have to pay, increasing your cash requirement that you have to pay because the bigger the loan, the larger the monthly payment.
… or you let go of team members and work the extra hours yourself, covering the job that the team member was doing. That’s a quick path to burnout.
The Solution
Look, those are short-term options that might get you by for a little bit, but in reality, they’re just band-aid fixes that don’t actually fix the cause of your cash flow problems. They're not the best options.
Profit First
That's one of the reasons why we love Profit First. It’s a cash flow management system that allows you to manage your cash in a way so that you have a reserve of cash to call upon when cash flow is tight, so that you can get through the short-term period while you take the time to dig deeper and fix the real issue.
Find the Root Problem
Think through all the possible reasons why your cash flow is tight. Dig a little deeper into your reports and KPIs.
Like, maybe you’ll discover the marketing method you've been using isn't working the same way. Maybe the copy is stale. Could be as simple as the image you’re using. But you want to dig deeper.
Clean Shop
At the end of the year is a great time to review your expenses and cash flow management system. Anytime is good, really, but specifically if you don't do it throughout the rest of the year, the end of the year is perfect. But take time to look through all your expenses, identifying things that maybe aren't necessary, not helping you get new clients or keep clients, and cut those expenses out. It's a great time to clean shop, if you will.
One of our team members had spent the last couple days deep cleaning their house physically, and she made a comment saying cleaning is therapy. It's the same thing financially. Clean up your unnecessary expenses. It's a form of therapy. You're going to feel great. You're going to feel lighter.
So don't just look for a short-term fix of borrowing money or letting go of team members because you're willing to work more hours. Look for the deeper issue and solve that. And more importantly, run the Profit First system so that if you do have a short-term cash crunch, you can weather that storm.
John Briggs | Tax Genius
info@incitetax.com
801-999-8295
John Briggs | Tax Genius
info@incitetax.com
801-999-8295
Visit our website @ Incite Tax
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