When I tell that to people, most of them look at me like I have a caterpillar stuck up my nose. I guess it's an unexpected response from an Accountant.
There are 7 things I do to help a company reach cash flow positive so that the owner can spend the summer in Aruba.
Here they are in their grandest fashion.
Trick #1 – Make the Cash Flow Decision
If you want to fix your cash flow struggles, the first thing you need to do is make the decision to improve. When you started your business, one of the reasons for doing so was to make money. Over time, you found yourself giving more and more to your company which led to late nights, stubble on the face, and too many Mountain Dews.
Until you decide that that crap has to stop, it never will. Businesses are vile creatures when you let them run rampant. They have fangs that will suck the soul right out of you. As its master, you need to stand up and reclaim your throne.
This might sound a bit trite, but it’s true. Draw a line in the sand and decide right now that your company will become a cash cow and pay you well. Once you do, use the next 6 tricks to make it happen.
ACTION ITEM: Make the decision right now that things are going to change!
Trick #2 – Reduce Your Steps to Cash Flow
Let’s start by looking at the hoops your customers have to jump through in order to buy. If you’re causing your customer to go through several layers of muck to learn about your company, do their research, struggle through your website, determine exactly what it is that you do, understand your return policy, read through a lengthy contract, get assigned to an employee, submit paperwork, and finally bust out the credit card for payment, you’ve got issues brother! In fact, you’re killing the deal right out of the gate.
ACTION ITEM: List every step that you force your customers to take before they can possible pay you. Can you get this down to no more than 3 simple steps? If so, you’ll be well on your way to Aruba.
Trick #3 – Eliminate Those Nasty Receivables
At Ignite Spot, we don’t take checks. The only form of payment we take is a bank draft. When I started the company, we were invoicing and waiting for checks just like every other accounting firm out there. I lost a lot of sleep during that time of my life.
I remember the day I decided to only take payment via bank draft. I was worried that I would lose clients, but you know what - I never did.
Now we get paid each and every month. We focus on our clients instead of having to do administrative work, spend time on the phone dealing with collections, and banging our heads against the wall.
ACTION ITEM: Call your bank and have them set up drafting. Going forward, put all new customers on the drafting plan and slowly convert your existing customers.
Trick #4 – Invest in Your Business, Don’t Suck it Dry
As a business owner, you fall into one of the following camps:
- The vampire: This kind of business owner bleeds the company dry with excessive spending on personal items. The vampire eats out on the company three times a day. The vampire takes huge “bonuses” at random times for random reasons. The Vampire essentially sucks at building a cash flow company – excuse the pun.
- The investor: This kind of business owner looks at his cash flow coming in and knows what brought it in. He reinvests that cash into top tier marketing and systems to generate a stronger business.
ACTION ITEM: Give yourself a budget for vampire like activities and stick to it. Then discover which marketing channels and business processes are growing your company and invest in them.
Trick #5 – Create Multiple Streams of Cash Flow
Right now you’re generating cash by producing a product or service. That’s great, but I guarantee there are at least 3 other ways to generate income from your clients.
A good example of this comes from a company that I love called Copyblogger. The company started out teaching people how to do online marketing. Since inception, they've grown to do more than just teach.
Then have several lines of income including:
- Website hosting via Websynthesis.com – Which Ignite Spot is hosted on
- WordPress tools like Scribe to help bloggers identify keywords for their posts
- Classes that teach people how to market their business online
- WordPress frameworks that allow people to build websites
ACTION ITEM: Write out the income streams your business relies on. Now go and discover 3 to five more that you can implement within the next 6 – 12 months.
Trick #6 – Get an Accountant that’s Awake
Not all accountants are created equal. Some of them are terrible. I can say that because I’ve been in the field for a long time now. I’m always amazed at what goes on behind the books. You don’t want to spend your life building your empire just to have your accountant mismanage things and funk it all up.
How do you know if your accountant is awake or not? Here are a few signs that your accountant is actually dead:
- He never has an answer for you
- The financial statements don’t feel right to you
- She is so focused on debits and credits that she fails to see your vision and run with it
- It takes him days to reconcile the bank account
- Your customers and vendors call way too much with questions
- You can’t sleep at night because you don’t know what’s going on
ACTION ITEM: If your accountant is dead in the water, get a better one; either use IGNITE SPOT or professional that you know. Don't hire an unqualified person to do your finances. Invest in a solution that you know will deliver.
Trick #7 – Set Up a Weekly Cash Flow Meeting
Never assume that your accountant has everything under control. You need to be involved at least once a week. During this meeting, your accountant should report back key figures that are important to you as a business owner.
During your meeting, you could talk about:
- Cash flow positions
- Receivable balances – if you still have them that is
- The performance of your income streams
- Monthly expenses
- Your reinvestment strategy in cash flow systems
ACTION ITEM: Set up a weekly meeting with your accountant and have it recur on your calendar. Give your accountant marching orders with what you would like to see each week so that you feel connected to your finances.
Taking it a Step Further
Want to take it a step further? Sign up for a free cash flow coaching session with me by filling out the form below.
Turning your business into a cash flow machine is easier than you might think. It does take some dedication on your part, but if you follow the 7 tricks above, we'll get you there!