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Are you tolerating a business that’s just barely succeeding? Hi, this is Judi Otton with GrowthCast and before I get into this week’s topic, I want to share with you that since I started this toleration series, I’ve been cleaning up all those little annoying things in my life, and it feels so good!
So let’s dive into today’s topic. Is your business just squeaking by, you know, at the end of the month, you really are struggling or always searching for cash flow?
The first thing we need to do is to determine if this a cash flow issue or is a profitability issue. And I want you to look at your profit and loss statement, also known as your income statement and your accounts receivable. Your profit and loss statement wants you to look at the very bottom line that should be consistently positive, and not just by a couple of dollars or $100, you know, consistent, reasonable profit. Yes, maybe you have a month where you had some unexpected expenses and that month is negative, but in general.
The second thing to look at is your accounts receivable. Is it high? And looking at your aged accounts receivable, which shows you what’s more than 90 days old. What’s more than 60 days old? Is that old stuff high? If that’s the case, go back to last week’s video, I’ll post it right here because that talks all about this. So if now you’ve determined it’s, if it’s cash flow, you’re going to look at last week’s video.
If it’s profitability, you have three big levers to change your profitability.
The first one is your pricing, what you’re charging for, your goods and services.
The second is your cost of goods sold or your cost of service sold, what it’s costing you to deliver these products and services.
And the third one is your overhead or fixed cost. That’s all the rest of the stuff to keep the lights on in your business. And each of these three things has different ways that you can manipulate them. So I’m going to get into that next week because it’s much too much to fit into a 3-minute video. So make sure you tune in, check out the playlist of all the tolerations right here, and if you want to get a head start on this and really clean up a lot of these things and master your financials, Please check out my Fiscal Fitness Boot Camp.
I’ll be back next week with a new Fiscal Fitness Tip of the Week, and we’ll talk about managing your profitability. See you later.