I’ve been thinking a lot about cash lately.
We’ve been helping clients manage cash flow and apply for government funding round the clock for the last two weeks and although the current rounding of funding dried up before most small businesses got their little piece, it’s no surprise that I’m seeing cash flow forecasts every time I close my eyes (also seeing that 1000 piece puzzle that I’m working on – anybody else know what I mean?).
A few years ago, I had just wrapped up my biggest year in business yet. My revenue was the highest it had ever been, I had grown my team, and I’d made big investments in my own development.
But at the end of the year, I barely had any more cash in the bank then when I’d started.
I’d done everything I was “supposed” to do and had very little to show for it. It was an incredible disappointment in a year of tough lessons learned, and also a source of shame if I’m being honest. I’m a Chief Financial Officer and help people with this stuff every single day – why does it seem so difficult in my own business?
Fast forward and this month I hit a major milestone I’d been working towards: the business cash reserve goal I’d been diligently building. Since that disappointing year, I’ve been methodically and strategically building this reserve (while not sacrificing investment or growth, I’ll add) and now, in the midst of a pandemic, I’ve hit the goal.
So what changed from a few years ago to now?
I started consistently using my own methodology!
Here’s the thing: nothing about managing your business finances strategically is difficult or complicated. In fact, it’s so simple that as a CFO, I kind of overlooked it.
But when you operate from a place of proactive decision-making, you can see your business finances into the future, and can sleep at night knowing you have cash in the bank to do what you need to do.
And after walking others through the same process again and again, now I’ve got the proof in my own business, and the peace of mind that I can weather the storm.
Maybe you’re thinking:
I’m ready to build a reserve and sleep better at night, especially during these weird times where I don’t even know what day it is!
But how do I start? Numbers are not my strong suit.
I challenge you today to figure out how many months of cash you have in the bank right now. It’s EASY.
- Check today’s bank balance. Yup, dig up your bank login and take a peek.
- Figure out your average monthly expenses. Look at the last 3-6 months of expenses and average it out. Find the info in Quickbooks, your bank/credit card statements, Excel spreadsheets, wherever you keep your info.
- Divide the bank balance by the average monthly expenses.
This number is how many months you could operate your business as normal if not another dollar came in. What’s your number? What’s your goal number?
Comment and let me know. There’s power in accountability, my friends!
Ready to dive ALL the way in? Grab our Contingency Plan template here and start mapping out your future!