New Year’s resolutions come and go both in our personal life and in business. Everyone says they are going to lose weight and join a gym in the new year. But for many, they seem to have difficulty meeting their own goals. And then in business, we set aggressive and sometimes hard to reach goals that only frustrate us right from the start.
The new year does provide us with a little motivation to get things done. After all, gyms are running membership specials, motivational gurus are putting their programs on sale and the media are putting their lists together.
But there is one resolution, if you want to call it a resolution, that we always recommend a business take on and that’s knowing where you stand on cash flow. Each year at this time, you should be getting a clear snapshot of where you stand on cash. If you’re not, the year ahead may not be as profitable as you might think.
So why take this advice from a collection agency? Simple…collection agencies are the ones that get the call from a panicked business owner that has finally realized that they have way too many receivables out there. In short, they don’t have as much cash flow as they thought they did. Are you guilty of this? There are countless occasions where our experts have taken the time to walk our clients though their cash flow and pinpoint where things can improve.
As a business owner or manager, you are probably making time to focus on sales, customer service and other parts of your operation. But putting time and some resources behind making sure you get paid is a wise investment.
While cash flow and receivables are something you should have a keen eye on all year long, a new year presents an opportunity to really take a hard look at the books.
Let’s take a look at a number of items that should get your attention in the New Year.
Budget: If you have not reviewed last year’s budget and put some firm numbers in place for the coming year, you are already behind. Your budget is your compass in business and it tells you where you are going when it comes to numbers. Your budget can be as elaborate or as simple as you like but the main point is to have one. If you are a consultant and maybe set up as a sole proprietor, maybe it’s a simple as cash in the door and your simple expenses such as rent, utilities, insurance and meetings. But if you are a much larger business, then this is a must have. In fact, it’s almost irresponsible not to have a detailed budget. Maybe you are saying to yourself, well of course we have a budget. That’s great. But you would be surprised at how many businesses that have more than a handful of employees and revenue streams have nothing.
If you are starting from scratch, contact a CPA today! Get something on paper to track your business. Cash flow and growth will suffer without a detailed budget.
Review receivables: If you have ever spent any time on our blog then you have heard this before. If you are in business, you are going to have to chase money. Unless every customer pays you in advance for anything you provide them, you are going to have receivables. While once again, you should be looking at your receivables on a regular basis, the beginning of the year should be a time to have a thorough review to uncover anything that might have been missed during the year.
This is also a great time to go over all of your billing procedures and button up any loose ends that may be getting in the way of you getting paid on time from your customers. Maybe you are not billing on a regular basis and maybe you find holes in the way your staff is tracking down late payments. The beginning of the year is a great time to go through everything and make any adjustments in payment strategies that can improve your cash flow.
Cash Reserve: Businesses go through many ups and downs as we are sure you are aware of. Most businesses have times where cash flow is pouring in and other times when you need to be careful with expenses. Take time at the outset of the year to establish some cash reserves. Cash reserves can help you get through unexpected expenses that need to be addressed. Those can include repairing technology, equipment repair, disasters such as storms and weather-related impacts. These costs can creep up on you very quickly and leave you in the red if you are not careful about planning.
Get help: When it comes to managing your cash flow, you might get to the point where you need help. There are a number of professionals that you should have by your side to maximize cash flow. If you don’t have a bookkeeper, get one. No business grows without the help of a bookkeeper, full or part time. Hire one or find one that is outsourced. It can be a small investment that can pay off in many ways.
Retain a CPA. There are a few very big reasons to make sure your business has a CPA. First, unless you are a consultant and you are just charging for time, then your numbers can get complicated. Although we would argue you should have a CPA regardless. A CPA helps you understand you own numbers. Second, tax laws change all the time both on the federal and local level. It’s not your job to keep up on these matters. Your job is to run and grow your company. Let your CPA keep up to date on these. It’s what they do.
Partner with a reputable collection agency: At the beginning of the year, you should not be forced into getting on Google and keying in, “I need a collection agency fast” because you finally realized that a ton of clients owe you money. You should have a collection agency ready to serve your needs as part of your accounts receivable program. Take time to interview collections agencies and find the one that matches your values, understand your goals and even specializes in your industry. For example, if you are running a lawn care company, you would want to know that the collection agency understands your challenges and even has endorsements from key organizations. If you are a medical or dental practice, you the comfort of know that the agency you choose, has experts in medical collections.
It’s a new year and it’s time to make a great one for your organization. Take a step back, look at your numbers, put new and improved systems in place for getting paid and you should be on your way to regular and positive cash flow.