Posted by: Gerry McColl on March 10, 2016 | Categories:
You’re clean through on goal, only the keeper to beat, nailed on to score. You’re all ready to wheel away in ecstasy. Then, from nowhere, disaster strikes, a tug. Your shirt stretches out behind you, momentum interrupted, the moment gone as the keeper gratefully scoops up the loose ball. You’re incandescent!. And so you should be. In sport, the outrage would be justifiable. But step out of your striker’s boots for a moment….
You are the Chief Executive of an ambitious growing business, and you’ve just been offered a huge sales order. It’s one you weren’t expecting. Your income for the year will go through the roof!
Do you take the order?….Deal or no deal?
Your instincts will, of course, tell you, “Yes. Grab it. You’ll be able to fulfil that order somehow. A bit of extra graft, a few extra hours here and there….”
If you haven’t planned for it—or thought through the full implications of saying yes—it could all become a disaster
Businesses that fail can often be profitable and growing. Your success can be a disaster. You can sell, sell, sell, but if you haven’t thought through your financial position, you are likely to fail.
You and your business need to be in a ready position to say yes. So how do you do that?
You need a plan and a budget. This plan needs to set out what you are going to sell and to whom, what you need to buy, and who you are going to employ. The plan should also outline what you need in terms of cash-flow and funding.
Getting this right is a challenge for businesses of all sizes. Nobody can predict the future. When reality differs from the plan, good businesses will discern this and make decisions. Where projected sales are less, adjustments to stock levels and spending are obvious. When sales are higher, the levels of working capital needed have to be looked at and adjusted accordingly.
Identifying what your working capital needs are today—or will be in six months or a year—is crucial to having the time to organise funding.
Simply saying “yes” and then muddling on as your under-resourced team flounder isn’t the answer. Your suppliers get upset because they haven’t been paid on time, and your key customer walks away unhappy is a disaster you won’t want to think about.
This is where too many UK businesses fail. Extending more credit to customers cannot be done at the expense of employees or suppliers. When will you get paid is a key question that must be asked. Don’t assume you will get paid the same way as before or, indeed, even at all!
Whether you’re a service-based business, a wholesaler, or a manufacturer, you need to speak to your customers. Our British nature often means we don’t like to demand payment. But it’s hard to stop supplying a good customer isn’t it ?. Wouldn’t that also be a disaster ?.
All business must know who owes them money and monitor payments daily. Someone senior needs to approve all new orders from customers with overdue accounts. Poor excuses should not be tolerated.
Regular management information should include details of the order book. It should also show what is owed to you and how old the debt is, what you owe to your suppliers and a minimum 30 days cash forecast that can predict cash level risk before it becomes an issue.
With modern, affordable technology and accountancy software packages, there’s really no excuse not to capture all the relevant information in an efficient way. Providing you then learn how to use the data at your disposal, or have an advisor on hand, you can be in control and know whether to say “yes.”
Because nobody wants the success to be a disaster!
With Answerconnect at your side, should your business experience a sudden increase in call volumes for any reason, we are a cost effective solution help manage that aspect of your business growth.
AnswerConnect at 0800 802 1609 or register here today to ensure your clients are greeted by capable, responsive professionals 24/7/365.
Redrafted by Gerry McColl