You could have an absolutely dynamite product or service. Your business model could be impeccable. But if you don't manage your cash correctly, you very well could fail.
Clearly, to run a successful business, you need more than just a good idea. You need a solid managerial strategy. You must focus on the books. Because if you mishandle your finances, your business could be toast.
One way to help improve your company's finances is to look for areas in which you are losing cash. You'll probably find that you are spending money that you simply don't have to spend. So, wise up and fix the issue. Here are five signs that your business could be bleeding cash—and some advice on how to stop it.
1. Management tasks are done manually.
Is too much time being wasted on sending invoices, processing payroll, sorting emails and scheduling appointments? It's alarming that, according to a 2015 survey of nearly 1,000 managers in the U.S. and U.K. by ServiceNow, nearly half of managers say this type of administrative work leaves them with less time for strategic initiatives.
While these duties are certainly important, they can be automated with today's technological solutions. And you and your team can spend more time on what matters—producing a great product or service.
For example, to process payments to employees, you can use payroll solutions like Intuit Online Payroll or Quickbooks Online Payroll. If you run social-media marketing campaigns, try a service like Hootsuite to schedule posts to go live across all your channels. And for scheduling meetings, try a tool like Calendly.
2. Clients aren't paying on time.
Every startup and small business has been left waiting for payment at some point. Even if you know you'll eventually get paid, this is still costing you money.
While waiting for payment, you may have to get money from other sources to pay employees, fund marketing initiatives, cover rent and handle other requirements. Obtaining that money from a business line of credit or business credit card, for instance, is very possible. But this can cost you in interest (which would be totally unnecessary if the client had paid you on time).
To stop this from happening, politely establish clear payment policies with each client. You could ask for a percentage up front, and the rest once the project's completed. Also, automate invoicing and reminders if the payment is late, and set a timeframe for charging a late fee. If payment is significantly late (like four weeks), you might consider stopping work until the balance is paid.
3. Rent is just too much.
Yes, a swanky downtown office is nice, but you don't necessarily need it. Put that cash toward other activities, like marketing and advertising campaigns.
Co-working spaces can offer flexible short-term leasing plans for shared office space. You can also allow employees to work from home, which may raise productivity and workplace satisfaction all around. When your team needs to meet, you can do so virtually or in a public setting, like a cafe or library.
4. Daily expenses are too high.
Sure, it's nice to have the newest computers for your employees. Going out to eat each Friday is cool, too. And keeping the office super clean makes you feel good. But it's all probably unnecessary. Or, at the very least, you can choose much cheaper alternatives.
Just think about the classic coffee example. If a cup of coffee costs $3 with tip, that runs you $15 per week for each worker if you buy outside. Make it in the office, and you can help get those costs down considerably (probably to just a few bucks per worker).
Everything adds up over time, so you should try to save wherever you can. Do your best to track all your expenses and your wallet will thank you for it.
5. You don't negotiate deals.
If you don't at least attempt to negotiate pricing with your vendors, you are leaving money on the table. Whenever you hire outside help to provide goods or services, don't be hesitant to counteroffer. At worst, the price remains the same. At best, you save lots of money over time.
Getting the price of goods or services cut down by 5 to 10 percent (or more) is not impossible. Even if you already have a contract with most of your vendors, don't hesitate to reach out and discuss rates. When negotiating a deal, don't be contentious. Be professional, and explain your business situation. Make sure to offer them something in return for cutting rates, such as a contract extension.
Also, if you can, gather bids from multiple vendors when looking for help. Compare and choose the best offer for your company.
Stop the bleeding and build for the future.
It's tough to grow a business when you are constantly paying off debt, waiting on client payments and paying more than you should for services, products and property. It's also difficult to see how to turn your financial situation around when you don't track it.
Going forward, be completely clear on where your money is coming from and going to. Then, address the pain points with prejudice. By securing your cash flow, your company won't be held back by poor money management—and you can grow and scale when the demand arises.