If I’d had a pound for every business owner I’ve seen managing their business on their cash balance I’d be a wealthy man.
It’s very common and ensures that 80% of businesses stay in the zone of struggling or just getting by instead of thriving.
It’s true that the cash balance in a business is really important and is often the ultimate reality facing business owners but many of them stop there. If you want to just get by then focusing on your cash balance will achieve just that.
If you want to thrive chances are that you need to invest in your business and focus on its growth and performance. The cash balance is usually a lagging indicator of performance for service, manufacturing and construction industries and has a load of other non-performance items that impact it.
Performance needs to be measured by the profit and loss account together with the balance sheet. Questions like ‘what return or margin is my business making?’ need to be answered.
This means that business owners need accurate and reliable business data measuring the things you need to know to grow your company’s performance.
If you do that, the cash balance will take care of itself. You need to figure out what Key Performance Indicators (“KPIs”) capture how well your business is doing and measure them frequently against the actions you take to improve them.
Not all KPIs are metrics from the management accounts (like profits, gross and net margins etc.) some may be operational measures (sales calls made, meetings held, subscriptions sold etc.).
The point is KPIs will get you focused on the performance and prompt action to improve it.
Thriving comes from increased performance not just doing the same thing. We practice what we preach and our preaching fees are very reasonable so come and learn how to get your business thriving.