10 September 2007

Managing money problems

There are two kinds of businesses – those that have had money problems and those that will have money worries. It is a simple fact of doing business. I have a good friend of mine of who has been in business for over thirty years. About five years ago he almost went broke, at the age of 55. I was amazed at how calmly he told me this story. Today he is the major shareholder and CEO of a company that turns over $300 Million. That is the fickle nature of doing business. I have had financial ups and downs over the years and I expect to have more. That said, I have learned a few tips and about avoiding money problems and dealing with them when I have them.

Here are a few of my tips for avoiding money problems:

1. Keep great records and have an excellent bookkeeper.
2. Know exactly how much it costs to run your business each day, month and year. This gives you are target to aim for.
3. Learn to manage your cash flow – it will break you if you don’t manage it properly.
4. Don’t spend the money before it arrives. You haven’t got it till it is in your account.
5. Work out if you are making money on the products or services you are selling. We often think we are but on closer inspection we are not.

If you do get into financial trouble, which means you are having difficulty paying your bills, use these tips to help out:

1. Be honest with yourself about the situation. Don’t ignore it or believe that some magical thing will happen to fix everything.
2. Get some advice – professional advisors won’t judge you, they are there to help. There are always options even if it doesn’t feel like it right now.
3. Talk to a friend or mentor in business – odds on they have been through the same thing and they may be able to give you some really practical and helpful information. Plus it helps to be able to talk about your problems.
4. Communicate what the situation is with your creditors and most importantly what you are doing about it.
5. You often have two very simple choices – reduce expenses or increase income – ideally do both. Look at both to see what you can do. Breaking the situation down into two simple areas to focus on often makes managing the issues much easier.

If you are spending a lot of time and money worrying about money, it really won’t do much except give you an ulcer and turn your hair grey – worrying certainly won’t make the money come in.

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