Just like people, some businesses never have an annual check-up. Ask yourself when the last time was you did an annual business check-up. In times like this, when we are experiencing a business and economic shift, the question is very important for many reasons. Two things that come to mind are, how do I get more cash flow? How do I gain more profit? Both are key to a successful and healthy business. So, let’s look at both individually and together.
Cash flow is basically cash coming in versus cash going out. This question poses many different challenges, especially when we see a decline in revenues.
Profitability is important for many reasons. The banks like to see positive numbers regarding profit. Profit and retained earnings help with your financing needs as well as with your attractiveness if you are looking to sell your business. It also is a key indicator of how well the business is performing.
In good times, cash flow is good, and profits are positive, so we tend to go for the ride and not really look at giving our business an annual check-up. Are we are doing everything we can to improve and maintain cash flow and keep profits from taking a steep decline?
A recession could hit harder, faster, and last longer than anyone expected. Those who do not conduct an annual check-up got caught with having to be reactive rather than pro-active. This creates a time lag before we can make any adjustments and our cash flow and profits take the hits.
There are ways to ensure you can maintain or reduce the severity of cash flow issues and to help prevent profits from seeing a rapid decrease, but we must be proactive in every aspect of our business. Many businesses have hidden profit in their company; it just needs to be identified. These hidden profits in a business will also help improve cash flow. Unlike waiting for sales to increase these results can been seen relatively quickly. These hidden treasures will have a positive impact on your cash flow in the very short term and are sustainable. After all the goal is to keep as much money for your business and yourself.
Just like a physical check up for yourself where you and your doctor come up with a plan to ensure you stay on a healthy track for a long time, an annual business check up can ensure you and your business stay healthy for a long time even in a down market.
