There are many traps that can eat away at your profits and turn your once successful venture into a cash sucking nightmare. However, there are three that are very common ones that too many entrepreneurs fall into…but there’s no need for you and your company to be the next victim. I’ll identify those common traps plus what you can do to navigate your business away from the money-eaters.
BAD CUSTOMERS
I believe it is safe to say that every money-making business has had its share of bad customers: those clients that do nothing but complain and pay late. They suck up most of your time but count for little of your total revenues. These bad customers are draining you of precious resources – time and money. By constantly paying late, your cash flow can be stretched. Through their constant need for attention, you and your staff spend most of your energies on them and not on producing additional revenues for your company.
Remedy: Fire your bad customers! Yes, drop them like a hot potato and now! Don’t spend another day losing time and money. Choose to work with those clients that pay their bills on-time (yes, even in a down economy) and that respect your time. Getting rid of the bad customers will free you to attract and work with more good customers.
TOO MUCH INVENTORY
Yes, I too have heard the saying when opportunity and preparedness meet there is success. However, too much preparedness in the case of stocking inventory can leave you with too many products on hand and not enough buyers. This is especially damaging to your profits if any number of your products are set to expire or are being cancelled.
Remedy: Don’t over shoot. It is good to be wishful and to hope for the best but remember to always plan with even the worst possible outcomes in mind. Maintain inventory levels that will meet your sales demand and not much more. If you calculate your daily inventory ratio (the number of days you have inventory on shelf before selling) and factor in how long it takes to produce your top selling products, then you can determine exactly when to restock your inventory and by how much. It may be best for you to have to split ship certain orders as you wait for additional inventory to arrive (assuming you can produce and have client-ready within a short period of time) then to have those extras laying around collecting dust and taking up space with no one to buy. Thoroughly consider every option available to you that will allow you to maintain healthy levels of inventory.
NOT PERFORMING FINANCIAL CHECK-UPS
If the term financial check-up is foreign to you, then ‘Houston’ we have a problem! Failure to regularly check your company’s financial position can leave you and your company profitless at the end of the year. Paying bills late can leave you with late fees that eventually begin to rival your mortgage/lease payments. Paying bills too early leaves you tight on cash and forced to borrow. Whatever way the bat swings, a lack of financial oversight can leave you calling for broke.
Remedy: Regular financial check-ups. There should be a detailed review of your company’s balance sheet, profit & loss statement, account receivables aging and payables aging reports, at least monthly more frequently for companies with no to little cash flow. Bottom-line: know when your money is coming in, how it is going out and if more is coming in then going out. Pay close attention to late fees and bank fees that result from improperly managed bank accounts. Please remember, paying your bills on time eliminates fees, paying your bills too early eliminates cash-flow.
To Your Success,
Craig Phinn
© 2010 The Phinn Group Corporation
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Business coaching power couple Craig and Denise Renee Phinn help new and seasoned entrepreneurs and business owners accelerate to their next level of marketing, client acquisition, revenue generation and wealth building. Get instant access to Craig and Denise’s free mini e-course highlighting proven branding techniques and sales strategies at http://ToYourSuccessCoaching.com.
