Coaches, Do You Make These 7 Deadly Cash Flow Mistakes in Your Practice?

Managing cash flow is every small business owner's most important function. Avoid these seven deadly mistakes to make sure you aren't creating cash flow problems in your coaching practice.

1. Using the "Fly By The Seat of Your Pants" Accounting Method.

When tax time rolls around do you find yourself pawing through piles of paper on your desk looking for credit card receipts from your business trip? Or are you upside down digging under the seat of your car trying to figure out where all your gas receipts are? Are you wondering if that coffee stained piece of paper is an invoice from a supplier? Do you have a vague feeling that someone, somewhere owes you money but, you just can't remember who it is? If so, you're probably guilty of operating with the "Fly By the Seat of Your Pants" accounting method.

Using this accounting method has a tremendous impact on your business's cash flow. Unless you have a system to track your business finances, you'll always be operating in the dark and in danger of imitating George of the Jungle as he slams into a tree.

2. Not Knowing What the Numbers Are All About.

Once you have a real honest to goodness useful accounting system, that's where the real fun starts. You've got a bunch of numbers but what in the world do you do with them?

Understanding what the numbers mean is crucial to your cash flow. Are sales trending up or down? Are expenses rising faster than sales? Is one coaching package more profitable or better selling than another? How many clients do you need to meet expenses each month? Can you take a paycheck this month? The answers all lie in the numbers.

3. Mismanaging Credit: I Owe You, You Owe Me.

There are two ways to mismanage credit in small business:

1. Granting credit without wise credit policies

2. Using credit with no plan of how to pay the bill.

Both have a huge impact on your cash flow and are often closely related. Here's a scenario to demonstrate that point. You have two opportunities: you can work on a big project for a corporate client or you can take on several small clients. You might think the big client is the way to go but how long will it take you to get paid? Often, large companies take their time paying-sometimes 60 or 90 days, sometimes longer. You may find that you've tied up a tremendous amount of your time with no cash flow to pay your bills. The smaller clients could provide you with more immediate cash flow without tying up all your time.

And it's easy when times get tough to pull out your credit card to cover your current expenses. But doing this with no plan of how you'll pay the bill gets many small business owners in hot water fast.

4. Ignoring the relationship between Receivables and Payables.

Do your Receivables and Payables "play nice" with each other? In a perfect world your receivables (what customers owe you) would be paid just in time for you to pay your payables (what you owe your vendors). But, if you're a small business owner you know Rule #1 is "Stuff Happens". The customer you thought would pay his bill this week, doesn't. So the bills you thought you could pay this week, don't get paid.

Are your Payables in balance with you Receivables? If what you owe to others is far more than what is owed to you, then, Houston, you have a problem.

And it's not just the balance that's important, it's the quality as well. If your receivables are as old as your Aunt Tilly, chances are good you'll never see the cash.

5. Focusing on profit instead of cash flow.

Ahh, Profit. The ultimate goal of every business. Or is it? Did you know that many businesses that fail are operating at a profit? How can that be? For the small business, cash flow is the ultimate goal. No cash flow. No business. Period.

What's the difference? Mostly the difference is in the decision making process. "If I take on this big job, it will earn me a huge profit, but if I take on five smaller jobs, I'll have cash to pay my bills." Yes, you want to be profitable but every decision has to be measured against the effect it will have on cash flow.

6. Forgetting your debt to society.

Some bills are easy to forget. Bills like insurance, payroll taxes, estimated taxes. They sort of sit out there, almost off the radar screen. They don't have to be paid right away. It's easy to forget them until BAM! they're due and they're due right now. And you better have the money to pay them or you're in hot water. Then, cash flow problems result as you rob Peter to pay Paul. It can take months or even years to recover.

7. Spending your company's future on a speed boat.

Haven't you always wanted a speed boat? Or a fancy car? Or an all expense paid trip to the Bahamas? It might be tempting to try to pass your personal purchases off as tax deductible business expenses. But, it's a bad idea for two reasons.

The folks who work at the IRS are over-worked but they're not stupid. The last thing you need is an audit. An audit that could reveal your transgressions and could result in an unexpected tax bill plus penalties and interest. Again, huge cash flow headache!

Here's the other reason it's a bad idea. Are you spending your company's future on frivolous or unnecessary expenses? Small businesses operate close to the edge. Unless you have a reserve to see you through the tough times, you're always in danger of being on the wrong side of that edge. You've got to take care of the goose that lays the golden eggs first. Then, you can pay yourself a properly taxed bonus and buy all the toys you want.

Caroline Jordan, MBA is a small business consultant and creator of Cash Flow Master , a Fast Track, No Holds Barred, Crash Course in Small Business Cash Flow. For more Cash Flow tips and techniques visit http://www.TheJordanResult.com/mastering.html . To get in touch, call Caroline at (207) 583-2630 or send an email to TheJordanResult@adelphia.net.

---

Theres Always Enough Time!

I thought I'd begin this article by stimulating your mind... Read More

Going Beyond Life Coaching

In Corrogue the air is chill and the frost is... Read More

Pecked to Death By Ducks

Ever been in a situation where it seems like minor... Read More

It?s All To Do With The Way You Wake Up

Do you start your day with anger, frustration and annoyance... Read More

The Art of Change

We don't change. I imagine such a statement could find... Read More

Voice Care for Coaches

Coaches rely heavily on their voice to service clients. If... Read More

Handling Disappointment

Disappointment is an inevitable part of home-based business. Clients won't... Read More

The Student Who Knew Too Much

This article is for those of you who coach or... Read More

The Power of Effective Coaching Skills

The most valuable assets of a 20th century company were... Read More

Relaxation Couldnt Be Simpler

Many people use their sofa and TV to help them... Read More

Is The Apprentice Bad For Your Health?

If you know who I mean when I say Kwame,... Read More

Can Versus Cant

It is my personal opinion that there are two words... Read More

How to Quickly and Easily Deal With Rude People

Where I live there seems to be a a growing... Read More

Why Therapy Fails Sometimes

I saw a couple for marriage counseling this week, and... Read More

Choosing The Perfect Coach

So, you're ready to start coaching. You either have some... Read More

Time Travel

Let me quote something you wrote. "When you reach the... Read More

How Stella (Laurie) Got Her Groove Back!

Being a Life Strategy Coach doesn't mean I'm always on... Read More

Drop and Gimme Ten!

Every one of us have dreams, desires and goals that... Read More

The Long Way

I wrote you about four years ago, when my eight... Read More

Trust In The Moment, and Trust In Yourself

Do you often get yourself upset and feeling less than... Read More

Budda In Your Back Pocket

The other day I was late for something. Not very... Read More

What is Life Coaching?

An recent article in Money Magazine said that "A coach... Read More

Change vs Transition

"There is a time for departure, even when there's no... Read More

Empowering Vision

Playing Our Part:Sir Michael Costa was conducting a rehearsal, in... Read More

Coaching vs. Directing - How Does Improv Theater Suggest You Should Lead Your Team

An age old battle in improv that I believe resonates... Read More

Are YOU a Dreamer?

This morning I watched a news article about a young... Read More

Mind the Gap

The underground train in London can get you anywhere when... Read More

Is Coaching Everything That It Is Cracked Up To Be?

Personal or business coaching has helped thousands change their lives... Read More

How to Forgive Another for Past Hurts

No one gets through life without being hurt by another... Read More

How to Optimize the Awesome Power of Thoughts and Imagination

Have you encountered a time when you were in a... Read More

Choosing The Right Coach

Coaching has become a very popular way for people to... Read More

Let?s Say You?re a Dog. Are You So Competitive You?d Eat a Carrot?

Seems like a gal always learns something out on the... Read More

Learning To Recognize Your Ego

What is an ego? Well, in case you didn't know... Read More