A major challenge has been keeping me awake at night, one that I have warned others about and yet one that has, quite frankly, landed us on the brink as a start-up. As an entrepreneur, I am often asked what I feel is the most important aspect of running a new business. And my answer is always CASH FLOW! Cash flow is ‘king’! But we have been jolted into a scary reality over the last month and we have to admit that we have not walked the walk.
It’s pretty easy to get caught up in the euphoria of a new business: signing deals, chasing prospects, building a team, raising revenues and reading budgets are all extremely rewarding and exciting, but who is the bloke checking on the collection of the moolah?
We’ve found ourselves in the precarious position of accumulating comfortably large debtor’s book –money not collected. Yes, it’s an accounting thing, but one that I view as, well, irresponsible trading. Clearly we have been too lenient in our administration process and weak with our controls. This has left us extended and vulnerable. Fortunately, we have a good relationship with our bank and have been able to make arrangements to carry our debtors – an expensive and highly stressful lesson, though.
However, emerging from every negative is a positive. This ‘monetary reality check’ has shifted our thinking entirely. Yes, we enjoyed the ‘set-up-shop’ and initial budding growth of our business, but now it’s clearly time to change tactics and become more responsible and profitable. After all, we love the game, but ultimately we are here to make money.
This short-term crisis has led us to deeply analyse the profitability of our business, and in doing so, we have established methods to measure profitability per division, and even further, per staff member. In other words, how productive are we? Every staff member must be measured on productivity, not only to be accountable, but also to be certain they are in the correct position in the business, that they are good at what they do, and that they are thinking commercially.
The key, of course, is to avoid becoming a bunch of suits focussed on numbers, but rather to be intelligent business people, doing what we do best, all the while turning a profit.
