Once upon a time, we learned that cash was king. Somewhere along the way, we lost sight of that lesson. Maybe it started with student loans and six months of 0% interest credit cards. We meant to pay those cards off but then the water heater broke and we needed new tires. Fact is, wages have not kept up with the cost of living. I could cite stats here, but one of the hard lessons we’ve learned from the Covid crisis is how few people had the recommended 3-6 months of expenses in savings.
The same addiction to debt is true of businesses both large and small. Duke Energy just announced a cost cutting measure of up to $450M due to Covid losses. This from a company with 2019 total revenue of $25B, operating expenses of $5.9B but cash on the books of only $442M. I feel confident that they’ll be able to keep the lights on, but without getting hung up on the size of the numbers, consider that they essentially have enough cash on hand to pay operating costs for 28 days.
Is it no wonder then that all across the country, small businesses are making some tough decisions trying to find a way to outlast the crisis hoping that they’ll be able to get back to normal soon. Some of those business owners may have even thought they were doing well; money was coming in, bills were being paid, maybe they were even taking a salary. Some of them may have known that they were treading water just holding week to week hoping to make payroll.
My sincere hope is that you’ve been able to get some assistance and will outlast Covid, but having grown up in a tourist area I assure you that business interruptions happen all the time. From the back office of my mom’s CPA firm, I know that many small businesses were one bad ski season away from disaster.
The good news is that, it doesn’t have to be that way. By implementing a more cash focused business model, you can monitor where your cash comes from and where it goes. This simple method is called Profit First and has a proven record of success with business just like yours. I have recently implemented this system in my own business and will be more than happy to discuss how it can make a difference for your business. You don’t have to wait until everything is back to normal. Taking action today will empower you to weather business ups and downs that we all know are coming.