How well is your business doing?
As we continue to navigate uncertain economic times, we encourage you to spend some time reviewing your business to ensure that you are well equipped to deal with the headwinds still to come. Some key questions that we think you should consider:
- What is the vision and purpose of your business? Do you have documented short and long-term goals?
- Is your business doing well – how do you know? What are your Key Performance Indicators (KPIs) and how do you measure and report on these? How often are they reviewed?
- Do you set a budget outlining your gross profit and net profit targets?
- Cashflow goals – do you know your cash conversion cycle (the length of time from purchasing stock, converting this to sales and being paid for these sales)? Is there anything you can do to shorten this timeframe?
- Are your customers satisfied with their experience? Do they do repeat business with you, and do they refer others for your services?
We all appreciate how important cashflow is in terms of business survival and this becomes vital in challenging times. Some points to consider regarding your cashflow for the next 6-12 months:
Level of sales – Firstly, is your level of sales able to support your overhead and other cash demands? Do you focus on client retention, generating leads, improving sales conversions, repeat client transactions and pricing strategies?
Inventory process – are you carrying the right level of stock? Is it time to review your stock ordering systems and stock control processes?
Gross profit margin – There are several strategies that can help increase your margin, such as improving team productivity, focusing on rework and waste reduction, reducing stock shrinkage etc.
Overheads – It’s good business practice to review your overheads each year. Doing a budget helps to identify what level of spend you expect in each area of your business and where you may be able to make some savings. Consider aspects such as technology platforms, marketing spend, projects etc.
Accounts Receivable – how are your debtor days looking (the time between billing and banking)? Ideally this cash cycle should be as short as possible.
Accounts Payable process – Reviewing supplier terms may improve your cashflow. Can you implement budgets and streamline your payments process to maximise payment discounts and avoid late penalties?
Debt/capital structure – A review of your existing debt may be in order. Perhaps your debt/capital structure could be improved, or debt consolidation might provide a cashflow benefit. Should you review and adjust what you’re drawing from the business? Does your business need a capital injection to fund growth?
If you would like help with any of these questions or need some guidance around reviewing your business, please get in touch with our team. Our team work alongside many clients to create business plans, set realistic and measurable goals, improve business performance and define strategies for success.