Your Financials Need More than Coasting can Provide
If you’ve been in business a while, you’ve inevitably experienced setbacks from time to time. And if your business is successful, you’ve likely used those setbacks as unique opportunities to learn and grow. Most of us understand that only through challenges are we given the space to truly experience growth. But most of us had never lived through a global pandemic … prior to last year.
When the initial stages of the pandemic began, we found strength in those previous experiences. We remembered the setbacks of the past and confidently told ourselves, and others, “We got this!” We adjusted, regrouped, and made the necessary pivots to keep our businesses going. And then, we waited for things to “get back to normal.” Surely, it was only a matter of time. When it didn’t end as quickly as we might have suspected in the beginning, we entered survival mode—that mindset that, while essential under certain circumstances, is no longer about long-term goals to thrive, but rather about short-term needs to survive.
How Survival Mode Steered Us Directly to Coasting Mode
Today, while we are still struggling with the pandemic, life has returned to some level of familiarity … to a degree. However, we remain hesitant to accept it. So, we find ourselves doing what we need for our businesses just to get by. We appear to have found some comfort in this newfound space. Work is coming in, it’s enough to pay the bills, everyone seems ok, so our business is seemingly fine. Or so we tell ourselves. In this new state of mind, we are no longer in survival mode because we’ve already survived. But surviving for such a prolonged period led us directly to the dangerous zone of coasting.
Coasting is generally found somewhere in between the motivation found in our usual business mentality and the fear at the foundation of survival mode. There is minimum energy and minimum output, but there is admittedly some forward movement. Essentially, we are just getting by with no real direction. We are too hesitant to make long-term goals and plans because we now fully understand how quickly everything can change. We are coasting in our businesses (and, in some respects, our lives).
While this hesitation to fully commit after enduring what we have is a typical human reaction, it is clearly no way to run a business. In addition to this recent lack of motivation and inspiration, the pandemic itself affected much of our businesses and financials, particularly if the business is in a growth phase.
If you are in a growth phase, it’s time to get candid about your mindset and your options, understand what numbers are needed, and develop a plan to reach those numbers. Companies in the growth phase see positive cash flow. With the ability to repay debt, they can seek additional capital to expand their market reach. Yet, if the owners or CFOs have been coasting, they likely don’t have their financials in order to approach possible investors or lenders. Ultimately, it comes down to finding a way out of coasting and to the motivation and effort to monitor financials more closely.
Make a Commitment to Increased Financial Monitoring
If we learned anything during a prolonged period of business closures, it was that liquidity is key to keeping a business afloat in times of crises. This means more cash on hand, faster. And increased cash flow means increased monitoring of accounts receivable to ensure money is coming in when it’s supposed to. It also means it’s time to ensure you are charging your customers or clients where needed. Late payment fees and interest, early pay discounts, retainers, and auto-payments are all ways to make sure you aren’t being taken advantage of financially. And implementing procedures for regular reminder calls and follow-ups is key to getting payments in quickly.
Cash flow, of course, is also about money going out. This is the time to evaluate expenses, many of which have also changed during the pandemic. There will inevitably be a decrease in some, but also an increase in others. At a minimum, consider the following questions:
- Have your office needs changed with more employees working remotely? Do you have the ability to downsize?
- How much are you saving due to fewer business trips and decreased meal and travel expenses? Where are these savings going?
- How much more are you spending on technology expenditures? We have seen firsthand the effect technology has on staying connected to employees and clients or customers without being physically present. And if your technology was not up to par, you may have spent much more than budgeted in the reinvestment of wi-fi, bandwidth, data storage, routers, webcams, and more sophisticated applications.
The consistent financial monitoring required of businesses takes attention and it takes work—neither of which is abundant in coasting mode. You may think you have enough cash on hand or that expenses are timely being paid, but without a true long-term plan and careful monitoring, you cannot forecast or grow to the next level.
Remember back to our pre-pandemic world. We were inspired. We were motivated. We knew we had to make plans, monitor our financials, set strategic goals, and put in the work to make progress. We weren’t coasting, we were resolute in our commitment to grow our businesses. It’s time to depart coasting mode and arrive back at the motivation mindset your financials and business require.
At Agile Planners, our goal is always to provide you with the knowledge you need to help make your business a financial success. And a clear understanding of the mindset required to grow your business is key to that knowledge and success. As always, our mission is to give you the best tools to empower your decision-making, increase productivity, and deliver predictable outcomes for your business today. In order to better understand what impacts your business, it’s important to review your profit and loss statement and balance sheet at the end of every month. Be sure to download our Month-End Review Best Practices for additional information and learn how our CFO services can help your company achieve its goals faster.