better business blog

Tips and stories to add value to you and your organisation

Over Trading

8 July 2013

You are running your business. That big order you pitched for finally arrives. Do you celebrate and get started? Or, do you pause and take a long hard look at your cash flow forecast?

The answer of course is to look at cash flow.

If we don’t know how much cash we are going to need to run our business then we might fall foul of over trading.

This happens when we accept too much work and then spend too much time and cash preparing it for delivery. In doing so our regular customers suffer and because we are spending all our energy on the ‘big order’ we don’t invoice other people and we spend too much on stock.

The business looks busy and feels successful, but in reality it is turning into a bubble that will pop once it has consumed all the cash. Pop! Bust! Gone!

Now the moral of the story is to have a cash flow forecast and to update it in real time as work is won and invoices are paid.

In over ten years of working as a business coach I’ve rarely met a small business who has a cash flow forecast. Too many people focus on year end profit and too few focus on cash as the fuel that will get them there.
I use a simple spreadsheet to track my cash flow and I update it at least twice a week.

What do you do?

What do you need to do differently?

Enjoy your week and enjoy proactively managing your cash – it will stop you from over trading.

Next week: Time Management Tips