Is Your Income Being Eaten Up By Expenses?

Business owners have an intimate relationship with the end of the month. It’s a fascinating balancing act juggling income and expenses every day, but the end of the month is crunch time.

How do you manage that dynamic tension in your business? Especially during any downturn in the economy or dip in your own business revenues.

Without a plan, and the tools and resources to implement that plan, you are up the creek without a paddle. Read on. There’s hope.

Implement a cash flow management system right away, if you do not already have one. Your accountant can help you with that and regular review of your actual situation against your plan is crucial. You will want to have a finger on your cash flow every day to anticipate needs, and to stash away excess cash for future projects.

Set up your lines of credit when times are good. Then don’t use them until you have to. When you need money is the worst time to ask for it because your financials will not look as good at that time as they might have looked six months or a year before. You may be convinced that an unexpected business opportunity is worth pursuing, but you will have to persuade the lender if you have to apply for a loan to take advantage of it.

Smooth out the peaks and valleys by setting up whatever you can as regular payments, so you only have to worry about what’s left outstanding at the end of a period.

Pay your taxes on time, especially your deductions at source and GST/HST owing. You collected the money but it’s not yours so put it in a separate account and file regularly according to the requirements of your business. If, for any reason, you forget or get behind, ask your accountant to help you negotiate with the Canada Revenue Agency and get it cleared up ASAP. Remember, the government is the only entity that can seize your assets without your permission.

Watch those expenses. Negotiate with suppliers regularly. They all want to keep their customers happy, just as you do. There are oodles of examples of how saving a bit here and there on frequently recurring expenses can add up to thousands of dollars saved. One less solder point on a soup can for the Campbell’s Soup Company saved them millions a year when implemented decades ago. That hasn’t increased soup sales, but it has made a forever larger profit on the cans of soup sold without forfeiting the quality of the can.

Your top employees are your biggest assets. Keeping them is your highest priority when looking at where to cut overheads. Be strategic about who you hire and who you promote and make sure the best feel appreciated.

Plan ahead – again and again. Without foresight, you can be blind-sided at every turn. Know what you are doing and why, and use cash-flow management as a tool for getting the results you want.