Customers often reach out to us at RightWay when they come across cash flow issues. Often we recommend a review of their business plans, their business model and/or a forecast looking ahead.
A month by month forecast over a 3 year period can help shed light on the business model, problems within the business and the range of possible cash outcomes based on their plans.
Looking ahead, one can be either conservative or optimistic – and it is interesting to explore all the possible cash outcomes when discussing this with customers.
Due to Covid-19, planning ahead 3 years has become more challenging. For a lot of businesses the range of possible cash outcomes has expanded. Many things we could take for granted in February can no longer be relied upon.
But even in these volatile times, there are still some handy tips to make sure your planning is useful for decision making.
- Know your numbers – typical advice from accountants, but can not be stressed enough. If you do not fully appreciate your business numbers, your plans might not be within economic reality. Having no plan at all is better than having an unrealistic plan.
- Focus on growth – identify growth opportunities, market segments you can be successful with, test your digital marketing ROI. It is good to plan for growth, but you need to have a good idea of where that growth is going to come from and the steps you and your team need to take to make it happen.
- Manage your time – it is very hard to plan ahead if all your time is spent on the day to day of the business. If you are too busy to get to planning, the first step might be to record your time so you can see what activities your time is being taken up with. Freeing up time can be easy enough to achieve if you have a good understanding of where the time is going.
- Know your purpose – in uncertain times, it is even more important to have a good idea of where you want to go with the business. If survival is the only goal, getting through it can seem a lot harder than if you have something to really work towards. Being clear on where you want to take the business beyond survival is not only key for motivation, but key for planning effectiveness too.
- Diversify / change / adapt – whether it is simplifying your processes, bringing in more automation, finally getting rid of paper usage or adjusting your services to make them more online compatible. Now is not the time to do the same things in the same way you have done before. Challenge every single assumption you have about the way you do things in your business.
- Be aware of the risks – we all know the saying about eggs and baskets. But can your business survive if your biggest customer cancels? Do you have a disgruntled employee on your team? What if the economy worsens? Do you have enough insurance/ACC cover? What are the biggest risks you face in the business, and more importantly what can you do to mitigate them?
- Be present, stay informed – with disinformation seemingly used as political weapons, make sure you stay informed of the facts and official government announcements. There has already been some government assistance to business. If you are not confident you are taking advantage of all that is on often, reach out for professional assistance. Burying your head in the day to day of the business is not a good approach for a rapidly changing world. Planning to make the right decisions is dependent on having a good awareness of the situation at hand.
- Get the most from your resources – do you know how much each member of your team contributes to the bottom line? Do you really need that office space in a socially distanced future? Every cost should be reviewed to either get the most out of it (or change it)
- Actively support your people – to get the best out of your team, you will need to support them. Sometimes it is as simple as a 10 min chat once a week. But proactive showing your support can mean a lot. But it’s not just employees, it might be suppliers, or customers, or the landlord. We are all in this together. Actively check in with people around your business often. If things get tough, or plans change – then having a strong relationship with people can promote working together to get through it. Being proactive about this can help identify potential issues before they happen, which makes for much easier planning.
- Challenge your business model – you need enough sales at a high enough margin to meet your OPEX and other obligations. Running at a cash deficit can sometimes be a valid strategy, but for most NZ businesses you will need to run at a sufficient profit to survive. Uncertain times only make this more important. Make sure you are charging enough, and also that your costs are well managed. If you are running at a loss, what can you change? Challenge everything, and make the bold changes to ensure that you have more cash coming in than going out on a consistent basis going forward.
If you and your business need help contact us today!