3 Bad Habits That Can Kill Your Bottom Line
We all have bad habits we can stand to kick, whether it’s smoking or running red lights or, in my case, pushing the snooze button no less than six times every morning. We know these things could have some repercussions, and yet we continue to do them anyway.
If you’ve been in business for a few years or you’re just starting out, you may have started developing habits for how things run around your office. Some of these habits may produce excellent results while others can be the business equivalent of a slow bleed—or, depending on how lethal, could kill your business. Make sure the following traits have not become habits in your business.
Not Tracking Cash Flow
Good cash flow management is similar to preventive health care—you go through the checkups at regular intervals so if something needs attention, you can act before it’s too late. The revenues your company has earned are not doing much good if they’re trapped in your clients’ bank accounts.
Not receiving prompt payments can have a negative impact on your cash flow. But setting expectations, clearly communicating them, and following through can help minimize your exposure. Here are four key ways your invoicing and collections policies can boost your cash flow:
1. Standardize Payment Terms
2. Increase Invoicing Frequency
3. Clarify Pricing Policies
4. Set Collections Policy
Paying attention to cash flow is an essential habit that every company needs!
Confusing Mark Up and Margin
Not sure about markup and margin? You could be doing it wrong. Both markup and margin percentages are ways of measuring company growth. Unfortunately, these are confusing because they describe the relationship among sales, costs and profit and do not mean the same thing.
Understanding the difference between markup and margin is crucial for pricing profitable jobs. The confusion comes when estimates are created using markup and financial statements produce margin numbers. Jobs must be priced to include all job costs, plus cover overhead and produce a profit.
Ignoring Recurring Revenue
The benefits of recurring revenue are undeniable—it establishes long-term relationships with your clients, boosts customer satisfaction, creates a steady cash flow, and increases the value of your business. But it’s not that simple, because there is not a one-size-fits-all business model to follow. Every company must find the mix that works best for them and their customers. But just because there is not a quick and easy solution does not mean you should ignore recurring revenue. To position your business for success, you must add RMR to your business model.
Do we have you thinking yet? Ready to start some new habits? You don’t have to go at these business topics alone. Let’s face it, a lot of times it can be intimidating diving into what you don’t know. If only you had a trusted advisor who understands your business and your specific needs ... Oh wait, you do!
CEDIA has partnered with Leslie Shiner of The Shiner Group to provide you resources on all of these topics. Cashflow and markup versus margin were covered in last year’s Business Toolkit webinar series. Both webinars have accompanying templates and white papers to help you get started. Bonus: You can access these resources 24/7/365 on the new cedia.net. As for recurring revenue, tune into this year’s Business Toolkit webinar series that will take a dive into recurring revenue. Visit cedia.net to get the tools you need to start breaking those bad habits today! •