As your business goes through the different stages of growth, you’ll encounter different blind spots as a leader. You can’t grow your business if you don’t also grow yourself. And growing as a leader requires being open to learning and admitting you don’t know it all.
Normally when we talk about cash flow problems, the problem is not enough cash to cover obligations. As your business grows and becomes more profitable, you’ll find yourself with a different problem—excess cash.
Is more money really a problem? It certainly can be. When things are going well, it’s easy for costs to creep in. It’s also easy for inefficient processes to become the status quo. The comfort of excess cash can cause you to undermine your own success.
Solving the Problem of Excess Cash
Use your excess cash as an opportunity to plan for the future. You can do this by following a few simple steps.
1. Create a budget. Start by creating a budget so you have a plan for what you’ll do with every dollar you make. We often think of budgets as a tool to help stretch our dollars when things are tight. Budgets can certainly be effective in that case, but ultimately, the purpose of a budget is to create a plan for spending your money—whether you have a lot or a little.
2. Check your profitability. Just because you have plenty of cash doesn’t mean you shouldn’t scrutinize your spending habits and look for opportunities to increase revenue or decrease expenses. As you create your budget, evaluate the profitability of your various products or services, and ensure your marketing budget aligns with promoting those that are most profitable.
3. Take advantage of business credit cards. Utilizing a credit card for purchases you already make allows you better control the timing of cash outflows and provides rewards or travel points. Cards have different reward categories, sign-up bonuses, and annual fees. So, it’s important to select the right card for your business.
The rewards really do add up, and choosing the right card can make a big impact. For example, when we analyzed the rewards of a small business with annual credit card spending of $1.7 million, we found they could earn $19,000 in rewards with one card and $41,000 with another. By using no card, or the wrong card, you’re leaving money on the table and missing an opportunity to streamline your purchasing processes.
Knowing where you stand financially is key to making the best decisions for your business. And spending cash well matters just as much as minding your spending. If you need help managing and interpreting your company’s finances, look into our virtual CFO services.
Create your Strategic Plan and design your budget to achieve those goals. Things to consider include:
- Are you paying yourself appropriately?
- How much should you set aside for cash reserves?
- How much do you want to invest in research and development?
- How much do you want to contribute to your retirement and/or the retirement of your employees?
- Do you need to add additional employees or outsourced relationships?
- Is your marketing budget strategic and intentional?
- Are you maximizing credit card rewards?
Having a Strategic Plan is also crucial to spending your cash well. It provides the vision you need to make the best decisions about your organization’s growth. If you want to learn more about how to grow your business with intention, check out our group coaching program, The Scaling Leader, here.
You can also check in on your organization’s overall health by taking our complimentary assessment—the Business Intelligence Grader. You’ll get insights into where you are strong and where you have opportunities for growth. If you want help reviewing your results, you’ll have the option to set up a Discovery Call with Courtney, our CEO, and creator of The Scaling Leader program.