S7E2: KISS: The Simple Secrets to Fixing Cash Problems Fast

If your profit looks strong but your bank account tells a different story, you’re not alone—and this episode is for you.

In this installment of the KISS series (Keep It Simple, Stupid), Pam Prior continues answering real finance questions from entrepreneurs who are tired of confusion and overwhelm. She breaks down the hidden traps inside your numbers and shows you why timing, not profit alone, determines whether your business thrives or struggles.

You’ll discover:

The most common cash flow mistake entrepreneurs make (and how to avoid it)

How to simplify money management so it stops running your life

Clear, actionable steps to build confidence in your finances

The KISS series was created to take finance out of the dark, remove the embarrassment entrepreneurs feel about money, and replace it with clarity and control.

Check out other KISS episodes for more no-nonsense answers, and follow the show so you don’t miss what’s next.

Transcript

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Foreign. Welcome back. It's cash flow time again, folks, and we are in the second of three episodes that I'm calling kiss. Keep it simple, stupid, because I need to give some simple answers to the questions that are coming up today for entrepreneurs and individuals with finances. So let's jump in. What if you remember from last week, first of all, there were five great questions last week, a lot of em relating to time. So hop back to the previous episode. Make sure you give that one a like and maybe subscribe and do the same to this one while you're in there. I'd really appreciate it because the more subscribers we can get, the more likes we can get, the more we can get this really, really important education out to entrepreneurs and individuals about how to manage their finances. We need to pull this thing out of the dark and have people stop being embarrassed and fussing about it. It's a thing. It's a thing for all of us. Let's talk about it and get some simple answers on the table. Right, enough of the commercial. This week we're going to jump into what is question number six. And if you remember, I'm looking at the questions, I'm literally giving you the answer on the fly. So Francis is back there going to wave at me if I start to get complicated, because the whole objective is to keep this simple, get you some important answers to the questions I know you have. All right, first thing I have here. What's the fastest way to fix a cash flow problem? Okay, when I say this, I am not insulting anybody, but the fastest way to fix a cash flow problem is to get the money that's coming in to come in faster and be more and get the money that's going out to go out slower and be less. Now you're sitting there going, well, that's obvious, great. But how about I give you some practical tips for how to actually do that, because that's what's often missed. Very easy to say. Yeah, well, get more money and get it faster, spend less money and spend it slower not going to do you a lot of good. What are some practical ways to do that? So let's look at the first one first. First of all, getting money in faster and getting more money thing number one, I want you to look at your pricing. Are you charging enough for the value you provide? And just to keep this simple, what I find a lot of times, especially with freelancers or entrepreneurs who've come out of corporate, is that you tend to charge people like an hourly rate that you're used to hearing about in your corporate life or that sounds like it might be about right. I want you to step back from that. And instead of thinking about, oh, I can charge this much per hour, I want you to put yourself in the place of your client or your customer and say, if they don't hire me, if they don't buy my product, how much time, energy and emotion are they going to have to spend to get nowhere near as close as I can get them to the answer they need as quickly as they need it? And then think about how to price that. I'm just giving you a quick example so that this does stay simple. Say that you know that in out there in the world people charge a $100 an hour for what you do. So I'm saying instead of billing your client going, hey, I'm going to work four hours on your project, I'm going to bill you $100 an hour. So I'm going to bill you $400. Think about it from that customer's perspective. Say that if they wanted to do what you're going to do for them all by themselves, they would either have to spend hours of their own time on it. That might be worth $1,000, they might need to go to training, which they're going to have to pay for, which say that's another $500. And they four or five weeks longer than it would take you to do it. And that's going to cost them another thousand dollars. So right out of the gate, if they don't hire you, they're going to spend $2,500. You know, you're really good at what you do. You know, there are tons of people out there that will basically are fighting their way down to the lowest price to offer this person. But you have a value you can provide and you need to be able to articulate that value and tell the customer, hey, this is what my service is worth to you. Look how much you'd be spending to get to potentially the wrong answer. I can do this faster, more accurately, and asking questions you don't even know to ask. So I need to make sure that you're going to split the price that you're going to charge them now between the value they're going to get and the old way you have of billing per hour. So say they are going to get$2,500 worth of value out of this. You don't have to charge them that much. That might be like, oh my God, that's totally off the charts. But split the Difference, right? Instead of $400 an hour, make$400 an hour sort of your bottom bumper and make 2500 your top bumper. I just made the light do weird things on my face. Make the 2500 be your top bumper and think about where inside that you ought to charge. Okay, so there's one way to get more money for what you're doing is to actually get paid for the value you're providing. So that's one thing. How do you get the money in quicker? We talked about this a little bit last week. But think about when you work with your customers, how long they take to pay you. The perfect situation is they pay you in advance. You know, I have a couple of entrepreneurs who very wisely have worked their business models to the point where, hey, you pay me now and I'll do this work over the next 30 days. You pay me in another 30 days, I'll do the work for the next 30 days, or you pay me a year in advance. It's kind of what they call in the old days a retainer model. It's like, you pay me, I'll do the work. That doesn't work for everybody, right? You can't always do that. You know, if you're a photographer, if you're a videographer, you can ask for a deposit ahead of time. They're not going to pay you the whole amount before you give them what they need. But make sure that you think about it. If you're charging $5,000 for a job that you're going to do, say, hey, because I need to get the supplies and stuff and do the travel and pay for the parking and pay some people to get things up and ready. Pre product production. I want a thousand dollars of that right now. And if you think about it, what you want to ask for in that immediate deposit is the amount of money you're going to need to spend to service that customer before they pay you. Okay, so say that for you. Do you're a videographer, you've got a $5,000 videography job. And you know you're going to have to pay a pre production person, a video person to be on site and a post production person. And you know that you're going to have to pay those people over the next 30 days, but you're not going to actually be giving your customer the product until maybe 60 days from now. So rather than wait for 60 days to get paid your $5,000, figure out how much money you're going to have to spend in cash on These people or these things, and when and get that much in a deposit up front. So say all those things add up to $1,500. Say, hey, I need to get $1,500 to start the job. And then I'll bill you the other 33, 3500 when we're done. Okay. That is a great way to handle expediting the time. If you want. The other way that I really love, pop over to the episode right before this on the Cash Flow podcast. And there's another very practical way to get money in a little bit faster. Okay. The second side of that is how do I spend less and take longer to spend it well, again? And I'm not doing this. I just don't want to repeat myself. Go back to the previous episode, and there's a really good tip on how to use credit cards without getting in credit card debt to extend the amount of time it takes for you to have to spend your money so you can keep it in your bank account another 30 days extra. So go back and look at that for the details. But know that's one thing, but what's the second thing? The second thing you can do around money going out of your business is reduce how much goes out, right? So say we're in really tough times. We're in really tough times, and you need to reduce how much is going out the door? Well, one of the things we do in our business, it used to be annually. Now we do it quarterly, is literally go through everything we're spending on software. And I will tell you that without exception, every single time we do the review, we come up with a way to do something differently or some technology that's been updated or upgraded that can do it better and faster, or we have three or four different things to do exactly the same job. Now, granted, I'm a little bit of a, shall we call it, tech junkie, so I'll buy a lot of these things. And so there's always the opportunity to clean that stuff out each quarter for my team. But even if you're not like me, even if you don't have to kind of try every new shiny object the minute it comes out, go ahead and review quarterly all the expenses in your business, not just the software, not just the training, all of them, every quarter. And I promise you, because I do this with every client I have, you will find what I call cash in the cushions, and that'll increase or decrease. Sorry, how much money is going out the door? Because not only do you get that Money back kind of right away, but you get it month after month after month after month potentially. So those are the two. Two things you can control is how much money's going out and how quickly and how much money's coming in and how quickly. And that's how you control it. Okay, Francis, we have time for the next one. Yeah, time for one more. All right. Okay, here's a good one. Should I use credit cards or loans to manage cash flow? The clickety click is just my dog coming down the stairs if you heard that. So I think we all have this very legitimate fear of getting too far into debt. Now, as entrepreneurs, we're risk takers, and we know that it costs money to make money. And we all have different tolerances, though, for how much debt we want to have. So the first thing I want to say is there is good debt and there's bad debt, and that's the most important thing I want to get across to you. What's the difference? Well, good debt is I know and understand very clearly what my cash flow is. And refer to all the questions we've asked and answered before this in this episode and the previous one. I know for sure when my money's coming in. I know for sure that it's going to be more than the money that's going out. Okay, if you can say that, then what you want to identify is that difference. So say, for example, I have. I'll just go back to the same example we just used. I have a customer who's going to pay me $5,000. I know it's going to cost me$1,500 to actually provide the service to that customer, but I can't get them to give me a deposit. They're just not used to it. They're a big client. They have their, you know, their ways. They're setting their ways, and they're just not going to give me a deposit. I've got a signed contract, and I know that money's coming in the door later. If you went and borrowed the $1,500 at this point to pay for the services to provide him, that's what I call good debt. You know when. How much you need, you know how long you need it, and you know that they're going to pay you because you have a signed contract now. So the thing I hear then is, well, what about interest rates? Credit card interest rates are 20 or 30%. They're not quite 18, anywhere from 15 to 20%. And then there are loans out there now going for 17 to 20%. But even if you do that, if you calculate what 20% interest is, that's an annual interest rate. And you're going to have it only for 30 days, it's only going to be a 12th of that. It's going to be. Let's just. I'm going to do the math in my head, which is terrible. I never should do this, but say it's really only going to be two and a half percent of whatever you borrow. Build that into your pricing. Okay. If you know you're going to have to borrow money, you're going to have to borrow $1,500. And let's make the math simple. Instead of two and a half percent, you have to borrow the money and you have to pay 10% on it. Even so, you're borrowing 1500 dollars and you know you're going to have to pay an extra 150 in interest on that. Raise your customer's price by 150 bucks. Raise it by 75 bucks. You're still going to make money on this business and you're still going to accelerate how quickly the money comes into you versus accelerate the cash flow timeline. All right, that's not as much of a kiss answer as I wanted to give, so I'm going to try and kiss it down a little bit. Good debt is when you know you've got money coming in the door that will cover that debt plus some. Okay. Bad debt is when you don't have a clear vision into the future of when money's coming in. You've got kind of an idea. You haven't really tested it. You have. You don't know what's. What's going to happen. You might get the money and you might not get the money in. Now, I'm going to qualify this a little bit, and I don't want to call it bad debt. I want to call it higher risk debt because it's not necessarily bad. In fact, I want to sweep that answer out of this entire conversation. It's risky debt. And here's where you need to make a decision. As an entrepreneur or as a person, how much risk am I willing to take? There are entrepreneurs that are like, I'm going to risk it all. I'm going to borrow a million bucks because my idea is gold and I'm going to go for it. And there are entrepreneurs who, like, I do not want a dollar in debt. Okay? Both of those are extremes. So for one, it's not bad debt because they have a high risk tolerance for the other one, who's very conservative, it would be bad debt. Because they don't have that risk tolerance. They're going to be on edge. Every minute that they're not paying that debt back. They're going to be wondering, am I ever going to get there? Oh, my God, I'm going to. This was the wrong thing to do. The gray clouds over their head. Whereas if they're kind of a high risk tolerance person, you're like, yeah, of course I borrowed the money. I may or may not get it back when I want to. I'll just restructure it later on down the road and pay for it another way. So the simple answer just to wrap it back up is what I'll call good debt, no matter what, regardless of your risk tolerance, is when you borrow money. But you know for sure that that much plus some is going to be coming back to you in your bank account in time to pay that debt. Okay, that's good debt. High risk debt is when you really don't know when the money's going to be coming in to cover that debt or to pay those, to pay that debt down. But if you're a high risk, if you've got a high risk tolerance, you're a risk taker. That's good debt for you in your own mind, and that's fine. But if you're very conservative, if you're going to worry every night about how much you owe and whether you're going to be able to make the next payment, that would be bad debt for you. If you're conservative because it would make you crazy. And when that kind of a gray cloud is over your head, it affects everything in your business. It makes your sales calls sound desperate. It makes you not spend money when you should spend money. It makes you see things through this filter of, I don't have enough money instead of, oh, yeah, I'm fine. I can make very logical decisions for my business because I know that what I've borrowed, I'm going to be able to pay back. Okay, I hope that kept it simple for those two. I think really good questions. We didn't cover as many questions. Went a little more in depth this time, but thanks for tuning in to our second episode. If you missed the first one again, go back. We're talking about cash flow and very easy, practical ways to solve your cash flow problems. And I look forward to seeing you next week. Sam.