Latest / The 3Bz Podcast - Building Better Business / EP146 - Is Your January Cash Flow a Problem or Just January Being January?

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EP146 - Is Your January Cash Flow a Problem or Just January Being January? · The 3Bz Podcast - Building Better Business

• 0:01
  Hi there business owner, and welcome to the Three BS Podcast,
• 0:04
  the place where we go beyond the numbers and dive into the
• 0:07
  strategies to help you build a Better Business one step at a
• 0:10
  time. I'm your host, Stephanie, a
• 0:12
  multi awarding entrepreneur with over a decade of experience in
• 0:15
  the bookkeeping and currency world.
• 0:17
  If you're a business owner looking to streamline, grow and
• 0:19
  get back the time that you deserve, you're in the right
• 0:21
  place tackling real world problems, answering tough
• 0:24
  questions and digging deep into business building secrets in
• 0:27
  just 15 minutes each week. So Are you ready to build a
• 0:31
  Better Business with confidence and clarity?
• 0:33
  Then let's go. Hello and welcome back to
• 0:37
  another episode of The Three BS Podcast, your go to place with
• 0:40
  15 minutes of CPD certified motivation, inspiration and
• 0:45
  education to help you build a Better Business.
• 0:48
  If you listen to last week's episode about resetting in
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  January, this one follows on perfectly because today we're
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  talking about something almost every business owner feels in
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  January, but very few talk about openly.
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  That's where I come in. Cash flow anxiety.
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  January is one of those months where the numbers can look
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  uncomfortable to say the very least.
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  And the problem isn't always the cash flow itself.
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  It's not knowing whether what you are seeing is normal or
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  whether it's a sign something needs fixing.
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  So in this episode, we're going to separate normal January
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  wobble from actual red flags, and I'll talk you through what
• 1:22
  to do with both if you're new here.
• 1:24
  Hi, I'm Stephanie, a business owner with over a decade of
• 1:27
  experience in the bookkeeping and accountancy world.
• 1:30
  Author, speaker, bookkeeper, accountant and business owner.
• 1:33
  I'm here to help you build a Better Business with all my
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  experience and learnings, the highs, the lows, everything in
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  between when it comes to entrepreneurship.
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  Let's start by normalizing this 1st January is often quieter for
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  almost all industries. Clients are slow to return,
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  decision making takes longer with that Christmas break,
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  invoices sit unpaid a little longer than usual, and expenses
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  still go out. Regardless of how motivated
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  everyone else feels after Christmas, that combination
• 2:01
  alone can make even a healthy business feel incredibly
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  fragile. Now let's add to that.
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  December spending, reduced working days, clients
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  reassessing their budgets, and business owners panicking and
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  pulling back. Suddenly, everything feels super
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  tense. Does that sound familiar?
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  That doesn't automatically mean that your business is failing.
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  It means January is doing what January always does.
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  Unless you're a bookkeeper or an accountant, cash flow is timing,
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  not just profit. And January is a timing heavy
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  month. So let's talk about what is
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  usually normal and not something to panic about.
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  First, slower payments. If your average debtor days
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  normally sit at 14 or 30 days, January just might stretch that
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  slightly. Debtor days are the time it
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  takes from you sending an invoice to actually receiving
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  the money into your bank. It's frustrating but not
• 2:50
  necessarily dangerous if you plan for it.
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  I think it's really important that you are aware that there's
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  bank holidays that other companies close over Christmas
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  for two whole weeks and that if your payment is due then that
• 3:00
  you've spoken to that customer and asked whether the payment
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  will be made before or after Christmas, for example.
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  Or checking that things will be paid on time just so that you
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  can manage your own company finances, knowing when that
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  money is due to come in rather than expecting it and it not
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  arriving. Secondly, quieter sales.
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  January is often slower for non essential services.
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  People are cautious, they're recovering financially from
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  Christmas and they're not impulsively spending.
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  If you are a product based businesses.
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  This is why so often January sales become a thing for most
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  retailers because they need to shift stock.
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  They know that sales are going to be quieter, and that means
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  that if they lower the prices on some of their products that at
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  least they're going to be making some sales as opposed to not
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  making any by keeping their prices what they are.
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  Remember that a quieter January does not undo a strong year, and
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  it does not set a precedence for the year ahead either.
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  Third, tie to cash flow, even when profit looks fine.
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  This is where business owners get confused, and I completely
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  understand it. You can be profitable on paper
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  and still feel absolutely skinned.
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  That's because profit and cash are not the same thing.
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  Remember that profit is what's left after all of your costs.
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  Cash is what's in the bank right now, and January often exposes
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  that gap more than any other time in the year.
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  If you expected this and planned for it, it's uncomfortable but
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  manageable, which is why the data is so important.
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  When you look at the trends, the peaks, the troughs throughout
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  the year across your business, it's easier if you know it's
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  come in to manage it. It's uncomfortable, yes, but if
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  you don't look at that data and don't plan ahead for it or
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  expect it, that's when it starts to feel really uncomfortable and
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  you start to panic. Now let's talk about when
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  January cash flow becomes a problem because this is super
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  important. First red flag you're surprised
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  by every year. If January always catches you
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  off guard, that's not bad luck. That's a planning issue.
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  And again, this is where you need to go through your data.
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  If January is a slower month, a quieter month, and you know it
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  is, then you need to plan for that every single year by saving
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  a bit of extra sales and putting it to one side in December or
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  Black Friday so that January's wage bills covered.
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  Second red flag that you don't know your numbers.
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  Now, as a bookkeeper and accountant, I would be doing you
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  a disservice if I didn't mention that you need to know your
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  numbers. If you can't tell me how much
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  money you need to cover the next 30 or 60 days, you're flying
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  blind. Anxiety grows in uncertainty and
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  we want to reduce anxiety wherever possible.
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  If you can't tell me how much money you need to cover the next
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  30 to 60 days, but you want to know that information, book a
• 5:39
  discovery call with me at ABCSUK and I'll see where I can help
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  you. We have a range of solutions,
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  whether it's a discovery call, a one to one session or power
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  hour, or ongoing monthly support year round.
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  ABCSUK helps you because your business deserves better.
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  And that third red flag is that you're relying on personal money
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  to prop up the business. Now, if you're doing this, I'm
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  not shaming you in any way, shape or form.
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  I see it so often where business owners and directors of the
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  limited companies are putting their own money in to cover wage
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  bills or VAT bills or to pay the suppliers.
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  And that director's loan account, if you're a limited
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  company, just bills and bills. And actually, what's happening
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  is that personal money is propping up the business, and it
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  also masks the problems within the business.
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  You're not going to see the issues in the cash flow if
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  you're constantly propping up the business with your own
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  personal money. If you're constantly dipping
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  into your own savings or you're using credit cards or overdrafts
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  to survive January, that's not sustainable.
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  And as I said, this is no shame here because I've seen it happen
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  countless times. The 4th red flag is that you're
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  avoiding looking at the bank balance.
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  Avoidance is often the biggest indicator that something needs
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  attention. If you're burying your head in
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  the sand with any part of your business, that's usually a big
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  sign that you need to eat that frog and do the scary thing
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  first. Because knowledge is power.
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  Ignoring the numbers does not make them kinder to you.
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  But you can make a plan. Once you get your head out of
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  that sand and face the problem, headline the 5th red flag and
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  you don't have a plan to fix it. Short term dips in a business
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  are one thing. I know it's difficult.
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  There's highs and lows. As an entrepreneur, it's not
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  easy, otherwise we would all be doing it.
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  But the ongoing stress without action is another.
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  So whether it's cash flow issues or holes in that business
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  bucket, you need a plan to start fixing them if the business is
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  going to be sustainable and continue to grow.
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  So what can you do right now if cash flow is feeling incredibly
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  tight? If January is feeling
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  uncomfortable? Here's what you need to focus
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  on. 1st get visibility. And now I don't mean going live
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  on Instagram everyday. List your known income and fixed
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  outgoings. Not a forecast based on hope.
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  Real numbers, real data, so you know where you're starting, what
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  known income is due in, what outgoings have to go out no
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  matter what. Second, tighten that credit
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  control. Make sure invoices are sent out
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  promptly. Follow up professionally.
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  Late payments are not a personality flaw, they're a
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  process issue and having that conversation with those
• 8:02
  customers is going to help get things paid quicker.
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  If you have a bookkeeper or an accountant already, they should
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  be offering credit control services to you.
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  If they don't do it, you can outsource to somebody who does.
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  If chasing up funds, if chasing up invoices it out of your
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  comfort zone, outsource it to somebody that's comfortable.
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  Credit control is one of the services that we offer to our
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  clients who are on that monthly recurring contract with us.
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  And a few years ago one of the companies that owed one of my
• 8:31
  clients money, one of their debtors was the Royal Household.
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  So I had to call up the Royal Household as the next step of
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  our credit control process. Obviously on their side they had
• 8:40
  lots of different levels of permissions before things could
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  be paid, but having to call the Royal Household is just a small
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  example, one of the Wilder ones that I've had to do in my time
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  as a bookkeeper, an accountant for our clients.
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  So if you don't have a credit controller in place and you're
• 8:57
  looking for one, go to the link in the show notes and book in a
• 8:59
  discovery call with me and let's see where I can help you build
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  your business. 3rd, review your pricing and offers.
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  January often exposes under pricing.
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  If you're busy but still tight on cash, something isn't a line.
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  This particularly relates to bookkeepers and accountants
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  because we all do it. January is when all those last
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  minute self assessments come in and we send emails throughout
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  the year from April when the tax year starts saying, OK, it's
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  time to do yourself assessment, it's time to do a tax return.
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  Would you like us to do your tax return again this year?
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  Something along those lines. And it's only a Christmas that
• 9:31
  business owners quite often stop and they go, Oh no, I need to do
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  myself assessment. We more often than not,
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  bookkeepers and accountants don't charge that premium for
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  the extra work. So we have a policy at ABCSUK is
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  that if you come to us after the 31st of October, there will be a
• 9:47
  surcharge on your invoice to take into consideration that
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  it's going to cost us more time, it's going to affect our
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  capacity. Fourthly, avoid panic decisions.
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  Discounting, slashing prices, all saying yes to the wrong work
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  can create bigger problems later, and it's important to
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  know that as a business owner it's OK to say no that work
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  doesn't fit. There will be better work along
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  the lines and discounting and slashing prices is not something
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  I ever really advise. I know a lot of the retail
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  businesses will do their January sales.
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  I often think you should add something extra as a freebie
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  rather than discounting and lowering the value of your
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  product or service. And finally, get support.
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  Whether that's your bookkeeper, accountant, or a trust advisor.
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  Don't sit in silence and suffer. Cash flow problems get worse
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  when they're hidden and we can really help not only get the
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  money into your bank account, but take away that stress too.
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  So here's the key. Take away January cash flow
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  anxiety is common. You're not alone here.
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  Not all of it is a red flag, but some of it absolutely is.
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  The difference here is awareness and action.
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  If you want January to feel calmer next year, this is the
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  month to understand your patterns and fix what's
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  underneath. Next week we're talking about
• 10:59
  pricing and why it might be holding your business back far
• 11:02
  more than you think. If you found this episode
• 11:05
  useful, please do like Rate and Review wherever you're listening
• 11:08
  to it or watching this podcast. It really helps this podcast
• 11:11
  reach more business owners who need practical, honest
• 11:14
  conversations about money in business.
• 11:17
  You can find the links and support in the show notes.
• 11:19
  This has been the Three BS Podcast.
• 11:21
  I'm Stephanie and I will see you next week for the next episode.
• 11:23
  Bye. And that brings us to the end of
• 11:26
  another episode of the Three BS Podcast.
• 11:29
  I hope you found it useful and that you're walking away with
• 11:31
  some motivation, inspiration or education to help you build a
• 11:35
  Better Business. Don't forget to subscribe, leave
• 11:38
  a review and of course connect with on social media for more
• 11:40
  insights, tips and behind the scenes content.
• 11:43
  Your next step in building a Better Business is just a click
• 11:45
  away. I can't wait to connect with you
• 11:47
  and I'll see you on the next episode.
• 11:49
  Bye.