Do you get behind sometimes?
One of the challenges of running a business is cash flow management.
Sometimes there is simply ‘too much month left over at the end of the money!’ And as the owner you are in the awkward situation of not being able to pay your bills on time!
It’s stressful for you, it’s frustrating for your suppliers and it can destroy professional relationships… and eventually it will destroy your business.
Hairdressing is a business that has good cash flow, meaning that we get money in every day, we don’t have invoices to issue and we don’t have people on 30, 60 and 90 day payments.
We’re lucky like that because it helps enormously with managing our cash flow. But there are still times where most of us will have ‘challenges’, either because a lack of financial planning and we haven’t budgeted properly, and as a result we have spent too much. Or what we anticipated we would generate in sales simply didn’t happen to leave you with a negative cash situation and unable to meet your financial commitments
So what do you do?
Assuming you can’t get a temporary bank overdraft or other extended lines of credit to settle debts you need to manage your way out of it.
Step 1: Don’t Ignore it!
These things happen, you’re not the first and you wont be the last, but don’t be blasé about it and don’t ignore it.
No one likes being on the receiving end of someone who isn’t paying their bills on time because obviously it has a knock on effect for them and their business.
Step 2: Get factual and develop a plan
Go into damage control mode, get help if you need it from your accountant or someone who can help set up a proper cashflow spreadsheet and work out a realistic plan that will enable you to pay off the debt within a time frame.
Step 3: Communicate with your creditors
Contact your creditors before they have to contact you, apologise for the situation and propose your payment plan to them.
If you can always offer them an amount that you can pay now [even if it’s a small amount] and then offer a fixed amount that you can pay back at regular intervals over a fixed time frame until the debt is cleared.
Most people will be happy with that as long as you commit to it and then make it happen. So do not ‘over commit’ because if you promise something that you know isn’t going to happen then the situation will just be getting worse. You are better to under-commit and over deliver.
Do not ignore your creditors calls or emails because again that is only going to make the situation worse! Make realistic commitments and then move heaven and earth to keep your promise!
Step 4: Set Limits!
I use to set limits with regular suppliers, so, for example, I say to my graphic designer and accountant to send me a bill every time we get to £500. that way I never get a surprise that I can’t handle.
Try that one. It makes a huge difference!
Thank you for watching…