The Best Question to Ask a Business Mentor about Improving Cash Flow

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The Best Question to Ask a Business Mentor about
Improving Cash Flow
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• Having your own business mentor can be wise
  decision for your business. Theres an infinite
  amount to learn about growing your business so
  why not access someone with ten or more years of
  experience instead of trying to learn it all
  yourself?
• Youll find business mentor in Brisbane if you
  live in Queensland, or in Sydney if you live
  there. They can be from your country or another
  one, it doesnt matter much where they are from.
• The number one challenge in business tends to be
  cash flow, or more importantly, surplus cash in
  the bank levels.
• Everyone would like to see more cash in their
  business bank account so how can a business
  mentor assist with achieving that?
• First of all its important to understand the two
  different aspects of cash flow versus cash in the
  bank levels as they are two different things.

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• Lets say there are two identical service
  businesses, except for when they ask to be paid.
• One service business operates with being paid
  upon commencement of the service, that generally
  takes a week to complete and lets say the second
  business invoices at the end of the service work,
  but on average has to wait two weeks to receive
  the money.
• The first business will have far better cash flow
  and cash in the bank levels, because the cash
  comes in three weeks sooner than the second
  business. Effectively, it will have three weeks
  worth of sales income in the bank more than the
  second business. It has better cash flow.
• From this example, cash flow is better due to
  pricing policies and this is one area you can
  consider for your own business, if you have that
  opportunity. In many industries it isnt possible
  to change payment terms, to be paid in full up
  front. If you can in your industry, you might
  like to consider a change in terms, such as a
  deposit up front, or all of the money up front
  from the sale. There are many businesses that
  operate at both ends and everything in-between of
  the payment timeline.

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• Being paid sooner, by reducing what some call the
  Average Debtor Day figure improves cash flow and
  cash in the bank levels, but theres another way
  to significantly increase the cash levels in the
  bank.
• Cash levels in the bank do not change the
  profitability of a business, which can be called
  the Operating Profit Margin or Net Profit Margin.
  This is the percentage of Operating or Net Profit
  on revenue that the business operates with,
  generally measured over a year.  
• A very effective way to increase the cash levels
  in the bank is to increase your business Net
  Profit Margin (NPM). 
• For the majority of businesses with 5 or more
  employees it is generally under 10. If it was
  say 5 then the net profit of the business is 5
  of the revenue.

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• If a business has 500,000 revenue with a net
  profit of 50,000 that would be 10 NPM.
• If the business can increase the figure from 10
  to 15 then the business would have 50 higher
  net profit, which using the same figures would be
  a net profit of 75,000 on the revenue of
  500,000.
• One of the primary goals of management of a
  business is to increase profitability.
  Profitability can be increased in a business two
  ways
• By increasing revenue, the net profit will
  increase
• By increasing the NPM, the net profit will
  increase (if revenue is the same)
• Reducing expenses or overheads will also increase
  the NPM of a business.

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• Increasing the NPM is a management skill that a
  lot of business mentors have in their repertoire.
  
• If you have a business mentor or are going to
  look at having one in future then ask them about
  increasing your business NPM.
• The NPM is like a measure of the efficiency of
  your business from leads to sales and ROI from
  advertising, to the ability to carry out work by
  employees and keeping overheads down as revenue
  increases.
• Increasing efficiency is a different way of
  thinking and it is was easy then every business
  would have loads of cash in the bank and there
  would be fewer failures.
• Ever heard of a business failing, while it had
  loads of cash in the bank?

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• Business failures are caused more by running out
  of cash than anything else. But is it a cash flow
  problem or a cash in the bank level problem that
  causes the failure?
• Failure is more due to cash in the bank, primary
  caused by the business having a low NPM. Yes a
  lot of businesses also fail due to a decrease in
  sales, but a low NPM will cause low cash levels
  in any and every business because theres so
  little profit on whats being sold.
• Talk to your business mentor about strategies to
  increase your business NPM. It could be the most
  rewarding question youll ever ask as a business
  owner because one you attune your mind to having
  a margin mindset youll enjoy the financial
  benefits that come your way.
• Its not uncommon for businesses to increase the
  NPM, without spending anything more on marketing.
  Whats the opportunity for improving your
  business NPM? Ask your business mentor that
  question too!
• Where youre looking for a business mentor in
  Sydney, Melbourne or New York City youll find
  them in every major city in many countries of the
  world.

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TIM STOKES
Business mentor Sydney Business mentor
Brisbane Profit Trans4mations Phone 1300 7
STEPS (1300 778 377) Phone [phone]
0477 https//www.profittrans4mations.com.au