“Sow an act, and you reap a habit.
Charles Reade (1814-1884)
Sow a habit, and you reap a character.”
Paying close attention to your financial reports can save you many sleepless nights and uncomfortable conversations with your banker or your accountant. More importantly, tracking your cash flow will assure timely payments of invoices and payroll. Keeping a close watch on your profit margin we have found to be far more critical than market share, especially during slow periods or while in a down economy.
Golden Mailer has found these nine habits to be very useful in developing our business model they have proven very beneficial in achieving a sustaining our place in a very competitive market. As a brief review here are the 9 habits have found to be the most useful in building our business:
- Know Your Market & What Your Customer Wants
- Develop a Mission Statement and Business Plan
- Create a Repeatable, Scalable Business Organization
- Develop a Culture of Discipline
- Be Professional
- Be Consistent & Follow Through
- Stay on Top of Profits & Cash Flow
- Keep Your Employees Involved
- Adapt to Changes
Stay on Top of Profits & Cash Flow
Maintaining this habit will pay dividends every day that you are in business. Most business owners underestimate the amount of capital required to cover unexpected expenses or periodic slow-downs in the economy. Sometimes, this lack of preparation is due to unrealistic income projections or an over confidence in the owner’s ability to control the costs of doing business. Whatever the cause, the importance of staying in tune with your profit margins and cash flow far exceeds your market share or increased sales volume. The critical point is this: don’t spend more than your income. This does not mean that you should avoid borrowing. Short-term bank loans may be important during certain periods of the business cycle, and certainly during the start-up period; just make sure your operating expenses can be covered by your income for a given period or cycle. A business typically requires a year or two to break even. Also, any new product or service will also require a period of time before it is self-sufficient. This means you need to anticipate such financial demands and plan for the additional costs and funds required while sustaining the business through these transitions. Your ability to predict the amount of funds required to launch a new venture or expand existing services or products will determine the level of success your business will attain.
Of all the habits discussed, the challenges faced in your business usually surround the issues of money. So, endeavor to make this habit a “must do” effort every day before, during, and after you close the shop. It will help keep you in business and out of debt.
Speaking of staying on top of profits and cash flow
- Do you have an accounting system that allows you to frequently review your profit margin and cash flow?
- How critical is the management of your cash in operating your business?
- Do you have complete control of all billing, collection, deposits, and payment of invoices, or do you delegate these tasks to others?