Tips for Fiscal Discipline and Expenditure Management

After managing $600M in cash flows for over 75 clients, I’ve realized most SMBs make the SAME 7 mistakes. Here they are (so you can avoid them): 1. 𝗭𝗲𝗿𝗼 𝗗𝗮𝘁𝗮-𝗗𝗿𝗶𝘃𝗲𝗻 𝗗𝗲𝗰𝗶𝘀𝗶𝗼𝗻 𝗠𝗮𝗸𝗶𝗻𝗴 Reliable bookkeeping and KPI tracking gives you something invaluable: Data about your business. But you have to put it to work: • Setup weekly/monthly reviews • Track statements, KPIs, variance etc. • Course correct based on what you find Once you have data, learn to read and analyze it. Use it to improve your decision making. 2. 𝗡𝗼 𝗕𝗼𝗼𝗸𝗸𝗲𝗲𝗽𝗶𝗻𝗴 Most small businesses either don’t have a bookkeeper or try to do it themselves. Neither option works. So hire a bookkeeper already! You can’t do anything if you do not know your "real" numbers. 3. 𝗡𝗲𝘃𝗲𝗿 𝗧𝗿𝗮𝗰𝗸𝗶𝗻𝗴 (𝗖𝗮𝘀𝗵) 𝗞𝗣𝗜𝘀 Poor cash flow management is the #1 reason most businesses fail. Which is ridiculous because you don’t need to be a finance genius to do this. You can simply start by tracking these 7 Cash KPIs: • Overdue ratio • Cash reserves • Free cash flow • Cash burn rate • Operating cash flows • Days of sales outstanding • Days of payables outstanding Track weekly, fortnightly, or monthly. The key is to get started. 4. 𝗨𝗻𝘀𝘁𝗮𝗯𝗹𝗲 𝗚𝗿𝗼𝘀𝘀 𝗠𝗮𝗿𝗴𝗶𝗻𝘀 Stable gross margins are the foundation of stable cash flows. While unstable margins are a sign of a breakage in your business model. The first step is to understand where you stand: • Calculate your gross margins • Review the trend for the past 6-12 months • Identify the pattern and deviations - then work on minimizing them Healthy margins are the secret to surviving business "mistakes". 5. 𝗡𝗼 𝗘𝗺𝗲𝗿𝗴𝗲𝗻𝗰𝘆 𝗙𝘂𝗻𝗱 The issue with most businesses isn’t cash flow, it's real-time cash availability. Why? Because they don’t keep enough cash on hand. So they’re surprised in case of an emergency: • A lawsuit • An Act of God • Unexpected attrition Keep 3-6 months of expenses in cash. 6. 𝗨𝗻𝗽𝗿𝗼𝗳𝗶𝘁𝗮𝗯𝗹𝗲 𝗨𝗻𝗶𝘁 𝗘𝗰𝗼𝗻𝗼𝗺𝗶𝗰𝘀 Not every business has high margins, and that’s okay. But it's not okay to have unreliable unit economics. Without sustainable unit economics, you'll only scale your business to bankruptcy. 7. 𝗡𝗼𝘁 𝗧𝗲𝘀𝘁𝗶𝗻𝗴 𝗣𝗿𝗶𝗰𝗶𝗻𝗴 Testing your pricing is the lowest-hanging fruit. Still, most SMB owners price their products arbitrarily. Here's a general guide: • Try charging more • Try different offers & price points • Try bundling services & products Test till it hurts. Thanks for reading! More small business owners need to be aware of these basic practices. Hope this quick post helped. If you liked it, please share and let me know what resonated most. Follow me for more!

Nobody talks about the unglamorous part of running an agency. The part where you deliver amazing work. Ship on time. Client loves it. Then wait 45 days to get paid. Meanwhile, payroll hits in 3 days. Cash is king. Everything else is fantasy. Here's what 18 months of running Jams taught me about staying alive: Invoice the same day. Always. Not tomorrow. Not "when I have time." The. Same. Day. Last month I delayed an invoice by 2 days. "It's just 2 days," I thought. Client went on vacation. Finance was backed up. That 2-day delay became a 3-week delay. Almost missed payroll because of "just 2 days." Follow up like your life depends on it. Because it does. My follow-up sequence: Day 1: Send invoice Day 7: Friendly reminder Day 14: WhatsApp message Day 21: Phone call Day 30: Less friendly reminder Feels aggressive? Your team can't eat "good relationships." The 3-client rule If losing one client kills your business, you don't have a business. You have a freelance gig. We learned this the hard way last year. One client = 60% of revenue. They delayed payment by 2 months. Nearly killed us. Now: No client over 35% of revenue. Takes discipline to say no to big contracts. Takes bankruptcy to learn why. Cash flow > Growth I turned down a huge project once. Payment terms: 90 days. Can't pay salaries with future money. Can't run servers on promises. Took a smaller project instead. 50% upfront. Less glamorous. Still in business. The uncomfortable truth: You're not a visionary CEO. You're a collections agent who codes. You're not building the future. You're making sure there is one. Every founder thinks they're above this. "I'll hire someone to handle that." Sure. With what money? The reality of service businesses: Monday: Ship incredible product Tuesday: Chase last month's invoice Wednesday: Negotiate payment plans Thursday: Ship more work Friday: Pray the bank transfer arrives It's not sexy. It's not fun. It's survival. But here's what nobody tells you: The discipline of cash flow management? It makes you a better business. Forces you to pick better clients. Makes you negotiate harder. Teaches you the value of every dollar. When cash is tight, you can't hide behind: Fancy offices Bloated teams Vanity metrics You're forced to focus on what matters: Value delivered. Money collected. Team paid. Still here after 18 months. Besides a few other reasons, it's also because we collect our invoices. Happy Saturday from someone who checks bank balances more than Instagram 💸 PS: last Monday was world dog day, and I found this awesome pic of me and Zamba enjoying life outdoors at Patagonia.

34% of SMBs have only a month or less of cash reserves. How do we address this critical issue? Here are 10 essential cash management rules: 1. Understanding Cash Metrics: Focus on operating and free cash flow, not just profits. 2. Building Cash Reserves: Maintain enough cash to cover 3-6 months of payroll, slow months, and unexpected equipment costs. Be cautious in volatile industries. 3. Analyzing Beyond the Bank Balance: Use weekly financial reports instead of just checking the bank balance to better understand cash obligations. 4. Efficient Invoicing: Invoice immediately and manage accounts receivable proactively to ensure quicker payments. 5. Strategic Payment Scheduling: Don’t rush to pay bills; optimize payables for better cash flow and maintain good vendor communication. 6. Inventory Management: Treat inventory as an investment and balance stock levels to avoid cash tie-ups. 7. Growth and Cash Flow: Manage growth carefully by securing credit in advance and understanding the cash conversion cycle to prevent cash shortages. 8. Tax Planning: Treat taxes as a critical expense and work with a knowledgeable CPA to plan for tax implications. 9. Prudent Use of Debt: Use debt strategically to support growth and investment, and maintain diverse banking relationships. 10. Maintaining Flexibility: Develop a flexible business strategy that includes multiple suppliers and cross-trained staff. These strategies can help SMBs manage their cash flow more effectively and safeguard against financial crises. If you want to go deeper, I wrote about this in my newsletter. Please read and subscribe: https://lnkd.in/gP4KXvDU

You will not find this profit strategy in any book and it’s extremely effective -- 𝘾𝙤𝙣𝙩𝙧𝙤𝙡𝙡𝙞𝙣𝙜 𝙀𝙭𝙥𝙚𝙣𝙨𝙚𝙨 𝙬𝙞𝙩𝙝𝙤𝙪𝙩 𝘾𝙪𝙩𝙩𝙞𝙣𝙜 𝙀𝙭𝙥𝙚𝙣𝙨𝙚𝙨. Rather than just focusing on cutting expenses, let's talk about optimizing your expenses for maximum profitability. Setting key financial benchmarks on your P&L will reveal where you are losing money and missing profit opportunities. If you have 𝗖𝗼𝘀𝘁 𝗼𝗳 𝗚𝗼𝗼𝗱𝘀 𝗦𝗼𝗹𝗱 (i.e., products, inventory, materials, etc.,) measure the Gross Profit Margin ("𝗚𝗣𝗠") on your P&L. Do not use an internal report!  Your P&L is like your bathroom scale. It’s designed to give you honest feedback.  Internal reports have a way of skewing numbers, (like setting your scale back 10lbs).  Tell yourself the truth, and you will make better financial decisions. I see more profit opportunity (and $$ lost) in this one ratio (GPM) than anywhere else on the P&L.  The GPM has a compounding effect and is a force multiplier.  Even a small 4%-5% GPM increase can result in thousands of dollars in profit to the bottom line. Secondly, measure and benchmark your top 3-5 expenses as a percentage of revenue and establish a Net Profit Margin percentage that considers taxes, debt service, and how much cash you as the owner want to make in your business.  You likely can't cut your way to prosperity or reach your financial goals trying to save $10 on your phone bill.  But measuring your margins leads to better cash flow. What do you do to improve profits every year? #coaching #finance #profit

The phone is ringing with clients asking for your help. Revenue is increasing. Your associates are working very hard. You meet deadlines, deliver great work products, and answer all questions. And still… Cash flow is negative. You have more bills to pay now—including payroll—than you have money to cover them. You ask your accountant or CFO for help, and they tell you to do a 13-week cash flow forecast. Before you even bother, you know it will forecast negative cash flow for the next 13 weeks! I had a heated exchange with a CFO and self-appointed cash flow expert last week. He lists more than 100 ways to generate cash. But… He ignores the single most powerful, reliable, and everlasting way to improve cash flow. What is that? Your firm’s terms and conditions. When your terms and conditions require payment in advance you will never suffer from negative cash flow. Terms and conditions are part of your offers. Most professional and business services firms focus on what clients want and the tasks required to give the client what they want. The outcome of this focus ends up in a proposal. The proposal has a scope or list of the tasks. Even when the price or fee quoted is a flat fee, such as: ·       A lawyer with a flat fee for forming an LLC. ·       A mediator with a flat fee for a mediation. ·       A trainer with a fixed fee for a training session or class. ·       A PR company charges per piece written. ·       A compliance expert charges for each system they evaluate for compliance. The terms and conditions require payment after completion of the work! And the terms usually are 30 days. Which means your firm does work today, sends the invoice on some (later) date built into your invoicing system, and then gives the client 30 days to remit payment. You are causing your own negative cash flow! These two changes will create positive cash flow: 1) Terms and conditions require payment in advance. No ifs, ands, or buts. Without payment in advance, you do not do the work. If a client or prospect objects, they are a poor fit client. Let them go. 2) Change your pricing model to one that is not based on an unknown variable such as hours worked. My preferred pricing model is IMPACT Based Pricing that reflects the life changing differences you deliver to your clients. A helpful transition to or substitute for IMPACT Based Pricing is simply charging a fixed or flat fee. You are experienced in the work you do. You know what is involved in 99% of the work people hire you for. Set a fixed price and use it for a month. If you feel it’s not the right price, change it. Create positive cash flow. You have ALL the power to create positive cash flow. --Your pricing model --Your terms and conditions. --Your invoicing system When was the last time you looked closely at your proposals and your terms and conditions? If it’s been a while, it’s time for a fresh look. DM me to talk about a next step. #termsandconditions

You hate when prospects ghost you. Yet here you are, ghosting your finances? You build relationships for a living in sales. There's just one problem. You forgot one of the most important ones. ↳ Your relationship with money. Harsh truth: → Ignoring your problems does nothing. → It won't make any of them disappear. → It will only magnify them. Time is money, and you're wasting it. Here's why ghosting hurts you: You ignore your money because "you've got your whole life." ↓ The only focus you keep is the car you're driving and the lifestyle you're living. ↓ Years go by and you're 40 with barely any assets besides your home. ↓ All the planning you "should" have done is beginning to stress you out about money. ↓ The stress bleeds over into your career and family life. ↓ Relationships are strained and income takes a hit because of it. ↓ Your job is insecure and your family doesn't even recognize you. OPEN YOUR EYES. You could have prevented this nightmare. → Engaging with your finances is powerful. → Each check-in is a step toward your goals. Want to turn things around? Let's do it: → Book a quarterly meeting with yourself. Step 1: Know your cash flow 1. List all your income. 2. Review your spending. 3. Identify areas that are wasteful. 4. Cut them out and project cash flow. Step 2: Know your net worth 1. List out all assets. 2. List out all liabilities. 3. Plan to build your emergency fund. 4. Pay off any high-interest debt ( > 7%). Step 3: Build your wealth 1. Invest anything else. 2. Automate your investing. 3. Break it up in different accounts. 4. Break it up in different investments. Your finances are not set-it-and-forget-it. → Your financial health directly impacts the quality of your life, just as much as the success of your career does. You should be able to enjoy a night out without financial stress. Stop ghosting your finances. It’s time to get back in touch.