Banks are tightening

The days of extending credit to businesses that have holes in the profit and loss seem to be a distant memory. Only months ago, business owners could reasonably have expected to go to the bank,cap in hand and -

1. Take some more of the equity from their home or securitise additonal borrowing against the 8-10% growth
2. Extend th overdraft to tide the business owner

We believe those days are long gone. Be prepared to forecast your revenue ahead at least twelve months and woe betide the business with red ink in the last set of annual accounts.

If you’re in this position right now you need to cast the cold hard light of reality on your business model and plan to change it accordingly. This has been a long time brewing and it’s now a case of dealing with it. If you read the situationsit blog on wordpress you’ll see that futurists were talking about the mess we’re in a couple of years back.

Patch the holes in the sieve and do it quick and don’t count on tea, biscuits and a loan document at the bank.

Get your accounts up to date – start with your accountant and involve your bank – they do not like surprises. If the future looks bleak then deal with what’s in front of you oiver the next 90 days – keep your horizon short and improve your forecasting.

Good luck

So here’s the thing

Cash is king – fact. But how many business owners understand cash flow and the time frames involved?

So we’re business advisors and time and again we see business owners that drive the business by the speedo – how well we’re going instead of the fuel gauge- how long can we keep this going!

You can be profitable and you may have to close the doors – why?

Because if you’re not balancing out margins, debtors and creditors you will have a problem, If you can’t fund growth with positive net variable cash flow, you will have problem. If you’ve achieved this yet haven’t allowed for funding of your taxes, you will have a problem.

The answer – build a cash flow forecast based on your current business model and see how sustainable it is – then throw in a few curves – not being paid, unexpected replacement of assets, new employees.