GUT CHECK!
How long has it been since you analyzed your expenses? Not just inventory and equipment, but office supplies, professional fees (don’t forget those attorney bills!), vehicles… How about payroll and owner draws?
In the current economy many business owners will tighten everything except payroll and still wonder where the cash went. It may simply not be possible to continue to pay yourself or your employees what everyone “used” to make. Or, the owner may have “big truck syndrome” and is buying inappropriate items (trucks, nice cars, etc.)
Ask yourself:
Make sure to look at travel expenses, meals and entertainment…daily lattes… This is not the time to buy bulk items of highlighters and paper clips! Less is more and be frugal! If you feel all expenses are justified, move on to the next question.
| If you aren’t sure, stop here and take the time to understand all of your purchasing. Plan to spend part of a day if necessary! Make sure that all items are included in your budget! In the mean time, STOP SPENDING. |
| If you have trouble defining critical, we’ll help you decide what’s critical for your operation. One hint: nice cars are not critical to the operations of the company… |
It should be at the bottom. Remember that owner’s draws do not normally shown on the
P&L, but eat away cash! If the owners are getting paid the most, and are at the top of the list – you may suffer from what we call “Eating your Milk Cow.” Owners have a fine line to walk – support themselves and support a needy company. But, you can’t make hamburgers out of your milk cow and expect to have milk in the morning!
| If you fear this may be true for you, call us! |
These payments are not shown in expenses or on your P&L, but they eat your cash! Have you been using your credit card to pay health insurance or other critical expenses on line? Did you use credit cards to fund growth and now can’t make the payments?
Are all normal expenses justified?
Return to the Cash Flow module