By Mark Estall, CEO and co-founder of 9 Spokes.
Many entrepreneurs, myself included, have been guilty of running their businesses on a gut feel, relying on entrepreneurial flair or instinctually - following their nose. One thing I've learnt in my 30 years of managing businesses is that this is not the way to manage cash flow.
Cash flow is the lifeblood of a business. Business owners need to be precise about how much cash is coming in and going out and most importantly, what the net cash position will be for the next month, quarter, half year and year. Without this level of specific detail, decision making and management of the business becomes difficult.
This is even harder to manage during stages of growth. Funding for resources to support growth has been difficult for many businesses.
Scottish Pacific released its SME Growth Index last week and found that 65% of Australian SMEs use personal finances (including credit cards with high interest charges) to support business growth. This can be extremely tough on entrepreneurs and their families, but it's simply a lack of awareness about their cash flow position.
Cash is the single most important dimension of a business, underpinning all plans and initiatives. It is also the simplest metric to measure and monitor, but often the most neglected. Cash metrics are easily accessible - they're available from the bank or in their accounting system. What's hard is keeping them regularly updated because it requires time and tools.
Today, business owners have access to smart technology that is easily accessible online. Software in the Cloud can help a business keep track of their cash flow and other critical aspects of their business in real-time.
SMEs should be making greater use of these tools to support their decision making and manage their businesses on facts, not flair. Not only can a business owner work more efficiently having access to their business data in and out of the office, they can also see how they are performing and find insights that can help define their future business strategies.