When it comes right down to it, risk equals money in a small business. In fact, if you’re running a small business, that can be a risk in itself. Every day can present a challenge that can either help your business take off to a new level, or harm your business in some way. And hopefully your risk-taking takes you in the positive.
But it’s the risks we encounter daily that can cause a small business owner time, money and reputation. And it’s how you handle them that can make or break your profitability.
As a collection agency that works with small business, we hear countless stories from those in business about the ups and downs of their individual operations. From lawn care companies, contractors, veterinarians and even schools. And because we work extensively with dental and medical collections, we often hear the struggles of those medical practices as well.
You might think all we talk about is why their customers or patients are not paying. And that is mostly our focus during our conversations. But it is only one part of the issue when it comes to a business and the risks they take on every day.
There are so many aspects of being in business that can take a toll on cash flow and your ability to meet the demands of your customers.
There could be, and probably is an entire book on how having the right talent and staff can make a difference on your cash flow and profits. But let’s go through some of the more urgent parts of this. First, as we are sure you are aware of, just securing the right talent for your business can cost money. Depending on what type of business you are running, you may either run ads looking for staff or hire a job recruiter. Both cost money. No matter what method you use, hiring the wrong person can cost you. First, there can be an untold amount of lost revenue if that hire can’t perform the job and then of course, you need to spend money to replace that bad hire. A very expensive process.
High turnover is very expensive and extremely disruptive. The disruption can lead to other issues with your team and can even cause further disputes and loss of talent.
But these issues are not always the fault of your staff. If your organization is not properly training and onboarding new staff, that’s going to have an effect on retaining good talent. Make sure you have in place, top notch training at all levels and it is critical to onboard new staff in a way that not only gets them acclimated to the new position, but makes them feel welcomed and part of the team.
When customers start to talk about bad experiences with your business, it doesn’t take long to see the effects of that. Especially in this age of online reviews and social media. We have even heard many businesses complain about bad reviews even from potential customers. Maybe they didn’t like the sales person they were taking with and decided to make their dissatisfaction known to the world. It happens all the time.
You know your business better than anybody. But make sure the customer experience at all levels is what you, yourself would expect. From the time you meet a potential customer all the way until the service is completed. And beyond.
We are well aware of the fact that not all online reviews are accurate or even fair. But the major downside in having online reviews is that consumers pay attention to them and can and do make purchasing decisions based on them. Even if they have no idea if they are legitimate. Bottom line is that we are living in a world where word of mouth, good or bad is now at lightning speed. And that can have a serious impact on your profits.
This is one area where you need a careful eye. If you are not paying attention to cash going out the door, you could end up in a serious cash flow crunch in no time. While you have a number of fixed expenses such as office rent and other items, you need to watch out for things that can fluctuate. Depending on your industry, these can be daily changes. Take the food industry for example. Those prices can change rapidly. And any other business that sells products and makes items. The cost of certain materials change all the time.
But be on the lookout for other more harmful expenses. Say you build swimming pools or your business is another type of construction. What is the cost of poor workmanship? Because your team didn’t do what they said they would do, now causes you to fix that job. At your expense. And that adds up very quickly. Do that few times and you’ll be losing money.
We mentioned securing great talent above. In a tight labor market, you will pay more to secure that staff member. Business is good, you need the staff and you’ll need to pay for it as well.
There are so many ways that cash flow can go negative in a small business. But the number one reason is customers not paying on time or paying at all. You have tried your best to cut late-paying customers some slack but eventually you need to get paid. If you don’t pay attention to this aspect of your business, the risks involved can be devastating to a business.
What can make matters even worse is the terms you may have with your suppliers. If you don’t get paid for what you are providing your customer, you end up in a negative situation with your vendors. We are also a collection agency that handles B2B collections and this happens frequently. It’s a chain reaction of nonpayment that you don’t want to fall into.
It is imperative that your business stay on top of your receivables. Invoice on time and follow up promptly on payments that have not been received. Follow up with tact and respect and if you are in a position where customers just won’t pay, find a reputable collection agency to assist you in getting your cash flow back on track.
If you find yourself in a situation where the business is just not where you want to be in terms of cash flow, please contact our team today. We have decades of experience in many industries and can provide a detailed analysis of where your accounts receives stand and how we can help.