A twelve-part blog series outlining how to save, turnaround, and grow, your struggling or failing professional client service consultancy, architects practice, design studio, marketing communications (marcomms), PR, digital or creative agency business.
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Total Business Turnaround
Part 05 | Business Finance
As a leader of your business, you need to be versed in at least the basics of finance, record keeping and basic reporting. It would help you if you went beyond these, but any practical financial knowledge will be useful. If you simply don’t have the time or the inclination to learn about finance, you’d better make sure you’ve got someone you trust who is qualified and understands finance to lead that aspect of your business.
However, you must not simply abdicate your authority. This is an opportunity for you to delegate authority and monitor performance. You need to stay on top this, whether you know anything about finance or not.
Maintaining Cash Flow
We have already discussed how you can keep the cash flowing by billing promptly, avoiding over-trading, trimming your inventory and other other methods. Now we are going to go over a few other cash flow issues, like cross over, the dangers of the transition period, draw down availability, purchased debt and other issues you may need to deal with during your restructuring.
Getting paid means sending out invoices, but what is the best way to go about it? It is more than just printing up a bill and popping it in the mail. You need to understand that invoicing is a multi-stage process, the importance of building relationships, money fears, sales financing and other issues.
There are no hard and fast rules for chasing invoices, but once you’ve delivered your product or service to your client's satisfaction, it all comes down to ensuring the correct information is placed on the invoice, getting it into the hands of the right people and polite, efficient and consistent communication with the relevant people and departments until you either get paid or have to take legal action.
Credit Cards and Expenses
If you can’t show strong accounts and positive cash flow it’s unlikely that the business’s new bank will provide you with a simple debit card let alone a credit card of any form even with a low credit limit for at least 6 months. This is incredibly inconvenient especially when unexpected and minor expense items crop up during the transition when cash flow is at its most restricted.
You’re only options are to pay cash, write checks, have staff pay and reclaim on expenses, don’t pay, or use your own personal credit cards. Clearly not making the purchase is the preferred option, but some of these expenses will be legitimate operational expenses and can’t be avoided. You must be sure that you will be able to cover the expenses at the end of the month with salaries.
Dealing with Suppliers
Suppliers form a major part of your organisation. Without them, it’s highly unlikely that you would be able to deliver your products or services. In fact, without your suppliers you would have no business. It’s best to establish a deal mentality, one where you are dealing and negotiating to try and arrive at a win-win solution to both parties.
You need to work towards loyalty and it is important to be honest and return favours where and when you can. If your suppliers are no longer able to help you through difficult times, then you tried and must move on to find new suppliers. Business is business, but you must maintain integrity, honesty, openness, and make good on your debts with your suppliers if that’s how the relationship is ending.
The other side of the coin is your creditors. How you manage those you owe money to is every bit as important to the success of your business endeavours as how you manage those who owe money to you. Here are some suggestions:
Offer controlled repayment
You as creditor
Throughout the early years of your business, when you getting it established, you will be required to sign personal guarantees to secure financing for your business in the form of loans, leases, purchases, and financing facilities. When going over your personal guarantees, you will have to consider a number of issue including bank overdrafts, business loans, defaults and late payments, sales financing and company purchase agreements.
Depending on your personal financial position, you may have funded your business with personal loans and credit cards and these may still be outstanding. This can cause considerable cash flow problems for you personally if your business is in trouble and going through a restructuring process. Make sure you stay on top of your credit reports and keep your cash flow positive.