“My bank is bouncing cheques on me just when I’m making more profit than ever before. Why do banks do that?”
Does that ring bells with you? Too many of the businesses I work with say just that to me when I first see them.
The business does on the face of things look good. It is profitable and plenty of work is coming in. Nothing could possibly be wrong… could it? It’s just the bank being awkward… isn’t it?
Well, obviously something is wrong, but what?
Firstly lets get one possible cause out of the equation straight away. It is highly unlikely to be the bank. Why? Because, whether you like it or not, banks are NOT in the business of being awkward to their customers. Quite simply that would not be good business for them. They need their customers to succeed otherwise they (the bank) cannot and will not make money. Cheques will be bouncing because of an under lying problem in the business not the bank.
If it isn’t the banks fault what is the cause of this problem?
Ask yourself the following questions…
- Do you always open your bank statements and check the payments and receipts that you think you made against the ones shown on the statement?
- Do you offer credit terms? What are they? Who do you extend them to?
- When do you send out your invoices?
- How do you chase up late payers?
- What are your credit terms?
All of the answers you make to these questions can have potentially damaging implication on the cause of a business’ problem at the bank. The all affect a business’ cash flow.
You need to be proactive in your approach to rectifying and issues that arise from your answers to these questions.
If you don’t open your bank statements, how can you identify a problem at that is on the horizon before it hits you like the intercity on its way to London? If you don’t have time to open them now, you will soon have plenty of time on your hands when your business closes!
If the figures in the statement don’t agree with what you think they should, why don’t they? Investigate!
If you offer your customers credit terms, ask yourself does YOUR business benefit from them or is it just your customer who benefits?
Do you send out your invoices regularly and check up to see that they are paid on time? Too busy? You soon won’t be!
Do you receive credit terms from your suppliers? Are the terms better or worse than the terms you offer your customers. If you are regularly paying out for goods and services before you are paid you are most surely heading for trouble?
You can have a profitable business, but have poor cash flow. The world has seen many profitable businesses come and go when, with care they would have thrived.