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Accounting: Cash stress despite healthy profit Posted on February 14, 2020

Stressed man

Digital credit agency, CreditorWatch has tipped 2020 to be a tough year for SME’s. All too often, smart and profitable businesses find themselves short of cash because of the debtors and creditors they rely on. It takes one payment default to set things off course. Prevention is always the best cure, and communication is key.

It’s a debtor/creditor race. The money going out needs to be at pace with the money coming in.

There are ways to refine this process, and it comes down to planning, systems and communication.

A warning – The principles are simple, the execution is complex. And there are often some tough leadership decisions required along the way, but if running a sustainable business is your goal, you’ve just got to do it.

Planning

Does your business have a budget and an accurate and reliable forecast? Can you see by how much you need to grow and where you can generate that growth from? Leads generation is an important part of your planning – if you stand still, others will overtake.

Systems

There are digital systems that help you to retrospectively and pre-emptively analyse what has come in, what is due to come in, and the same for what is going out. With a click of a button you can monitor trouble spots and progress. This enables you to put the plans in place and be proactive about issues, rather than re-active. Stress can lead to poor decision-making. Remember, you can’t change what you haven’t measured.

It is also really important to have a debtor management system. This could be a combination of digital means (apps like Apxium or Debtor Daddy) and manual means such as a team resource who monitors debtors and follows them up. All too often, debtors will wait until it is necessary to pay. Make it necessary.

Communication

As soon as you identify a trouble-area such as negative cashflow or payment dates, gather expert advice around your options and your stakeholders. Plan your communication before you execute it. Stick to the facts and always be honest, professional and polite.

Quick survey: The profitable business with no cash

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