Cash control in your business is always important but becomes an especially big challenge during difficult economic times. The reality of owning a business is that your monthly expenses, regardless of how your business is doing or how the economy is faring, will be consumed by fixed overhead costs.
Each month these costs are required to be met in order to keep your company in business. Whether your business is run efficiently, is very well organised and has a solid reputation for products and services or not, these overhead costs will have to be paid monthly.
What is an example of an area of your business that is greatly affected by cash control?
Bringing a product to market, from development to testing to rolling it out to customers, is a costly endeavor. It ties up your cash flow with the costs associated with finalising and producing the new product.
Assuming it takes approximately 18 months to bring a product from inception to development and all the way to the market, that is a long time to be tying up money to finalise a product without bringing in revenue to pay for the new product. If there are any slow downs in the process, or you can’t get it to market fast enough, you run the risk of finally getting the product to market and it could end up being considered outdated or no longer relevant to customer’s needs.
Consequences of Being Slow to Market
If your company has issues bringing products to market in a timely manner, it can create a vicious cycle of slow product development for your business. The profits from one product’s sale generates revenues that are used to develop the next product. If the time to market is slowed by inefficient development, the risk of a competitive product overtaking yours increases dramatically.
Protecting your overall business is critical, especially during these challenging times. Every company needs to be properly insured to protect all the hard work that went into creating and growing your business. Comprehensive business insurance should be established to focus on each aspect of your company, to move it forward and make it successful.
This type of coverage provides a safeguard for unexpected events. Additionally, a full comprehensive protection plan can provide Business Interruption cover and loss of income. Should you need to temporarily close your doors due to an event covered by your policy, this cover will ensure you still have a business when it is over.
BizCover has access to a network of insurance companies and can quickly provide you free, multiple quotes so you can compare policies without the need to ring around or visit multiple websites. Within minutes you will have options to choose from and can obtain coverage immediately.
Obtaining several quotes from different insurance companies will allow you to see not only the different coverage levels but also the cost of each policy. BizCover can make this process easier and faster. For more information regarding the benefits of comprehensive business coverage, please go to https://www.bizcover.co.nz/business-insurance/.
Business Efficiency and Fixed Overhead Pricing
Business efficiency in product development and getting the product to market can put your company in an advantageous situation. Using the profits from one product provides the funding necessary to start the development of the next product for your company. Being efficient in your product development really pays off – it creates less cost and products making it to market earlier making them more competitive, and can even garner a bigger market share, too.
One area that remains the same every month is your fixed overhead costs. This includes rent, salaries, taxes, etc. Your fixed overhead costs burn your cash flow every month and if your lengthy product development cycles are burning even more of your cash, this will prevent earlier sales of your product. This cycle can wreak havoc on your cash flow.
Most businesses concentrate on how they can cut costs and how to increase revenues. Many companies do not really focus on how to increase their efficiency on their product development as well as their own organization. What do you think you can do to make your company more efficient to increase cash flow? What does that look like?
Develop a plan that you can put into action. With a focus on generating more gross revenue, how to cut costs, and how to add goals of operational efficiencies within your organization, you will be in a good position to control your cash flow and set your business up for success even in these challenging times.