A One-step Method to Increase Cash Flow and Avoid Financial Stress
The past years have provided us with a variety of processes and methods that promise to give you results. A to-do list to help increase cash flow. In this article, we offer a one-step process to provide you with clarity for better decision-making.
Can you really achieve financial success with one step? What is this all-encompassing step? Simply put, compare your expected results from your forecast to actual results per month.
To do this, you can forecast your revenue by client, service, or product per month. Start with a month. That’s all it takes to move forward to the path of financial stability. When you have the numbers down to a stable consistent forecast, you will be able to prepare for any business scenario.
Even though a month sounds like a doable short period, without close supervision and dedication, it is surprisingly difficult to stay on top of your figures. Here are 5 reasons why you should do it, nonetheless.
Points out your billing errors
With a month-end comparison of your revenues, you will start to see discrepancies between your expected revenue and your actual revenue. These are most likely the result of some overlooked billing. It could be a new customer that has not yet integrated into the system or a recurring fee that was overlooked. This forecast will help you see the holes in your system and help you prevent others from forming.
It’s like a team-building exercise
When your company starts growing, you often have no choice but to hire recruits who don’t know how the company works and could neglect to focus on where the company makes the most money. Having a forecast shows not only the future figures but also represents the past statistics of the company. Having a team be responsible for this forecast helps the employees become aware of the revenue makers and the margins.
This creates a team dynamic that could result in real-life savings. You could be saving on a lot of costs when you are creating a new product or service. The time it takes to set the price will be faster because you already know the trends.
When the whole team understands the impact of revenue on the business, communications become easier and more natural. When you use this as an incentive to encourage everyone to learn about the impact of revenue, you will be hitting 2 birds with one stone, well-trained staff, and well-managed books.
It helps you make non-biased decisions
When we take an objective stance and don’t take things personally, we take the emotion out of the decision-making and end up with a well-thought-out plan. As with any new venture, the discrepancies will be upsetting. But this is the reason why we make forecasts in the first place, to close the gap between these variances and take a step closer to better finances.
The longer we continue to forecast, the closer we are to undeviating estimates.
Creates better pricing and improves profitability
A forecast will help you create better pricing for your services and products. If your company compensates based on commissions, it will also help motivate your team to increase the revenue and drive them to better understand the factors affecting it and its margins. This will spur initiative on your team’s part to increase revenue by up-selling.
Good habits create great systems
Why bother with a forecast that has a short period? What can a one-month forecast do?
Making a habit out of comparing expected and actual revenue will not only help your short-term goals but more importantly, its consistent application will achieve long-term stability and profitability.
This stability will allow you to forecast with confidence in a longer range. You can start seeing how your decisions affect your long-term assets and investments and the trends that involve them.
With the pandemic and the socio-political turmoil we are experiencing today, you want to trust your finances to the right people. In Mehanna Advisory, we don’t just offer advice, we make your business, our business.