Taking Care of Business- How to Overcome Cash Shortages in Your Business

So you find your business account running out of cash? First, be kind to yourself – you are in an ocean of company that will help give you hope and laughter as you drown.


Let’s look at four possible causes of your angst, and what you can do about them.


  1. Sales not covering overheads.
  2. Working Capital control
  3. Owner Draw
  4. Theft


  1.  Sales Not Covering Overheads:Five major reasons for this:
  • You don’t have enough customers. You may have just started out in business, and so you are still building your customer base. Or the number of customers you have is insufficient for you to reach and surpass your break-even point.What is your break-even point? It’s the amount of money where your gross profit from your sales is the same as your overhead costs.  So there are three areas where you can make improvements:  sales, cost of sales, and overhead expenses.
    • Get more customers. There are a million ways. Promotion, advertising, special sales.
    • Reduce your cost of sales. Direct cost components include materials, labor and energy for products, and commissions for services.  Most companies can make major savings by re-engineering their product components so that they are simpler to produce or cheaper to buy, or don’t need such highly skilled labor.
    • Reduce your overhead expenses. Staff is often your largest expense. Seek to improve the productivity of your staff by simplifying controls, standardizing your business rules, and measuring their outputs. Rent is often the second major expense, so how well can you work in a smaller, more distant place? Can you sublet part of it to offset your costs? Consider utility alternatives to reduce electricity, gas, water, and phone.   Put in a policy of not printing stuff unless needed for compliance or a client – have the information available online instead. Lack of control over minor, office expenses can fritter away your hard-won sales, just like it so easily happens with your own pocket money. Put in controls.
  • You just lost a major customer. Sound advice I learned the hard way many years ago is not to let anyone customer provide more than 20% of your sales. The logic of this is pretty simple when you consider the break-even point.
  • Your customer order isn’t big enough. How good are you and you’re at upselling or cross-selling your customers? Just asking a simple little question can add 15-30% to your sales and available cash.  MacDonalds did it and made millions upon millions by having their counter staff ask, “Do you want fries with that?”  it works for service businesses as well as with products, particularly with a related item that adds value to the original purchase…
  • Your costs are rising faster than your sales returns. If you don’t keep tabs on your costs, then you are likely to be in for a big surprise. Make sure you have a system to measure your total costs, so you can keep track of your gross profit.
  • Your prices are too low. Especially in services, many people are afraid to ask a reasonable price for what they provide and often succumb to customers demanding more for less or even nothing.
    • Add 10% to your prices and find how virtually nobody notices and few of those who do complain.  Then add 10% again.
    • If you are in a service business, change from quoting by the hour to quoting for the benefits to be provided, which also gives you an opportunity to highlight the fee in context of the return on investment your client is going to enjoy. Look at how you can offer a guarantee for meeting the benefits you are offering.

 2. Working Capital Control

Working Capital is the money you need to keep your business humming along. It consists of four elements:

  • Cash in the bank and Petty cash.
  • Cash owed by customers. For the Bali cash economy, this is not a problem area for most businesses. But you must keep control of any outstanding payments. Wherever possible get payment or a deposit in advance. Limit your terms to payment WITHIN 7 days, not 30 – and get in touch with them for payment just before the 7 days are up.
  • Cash tied up in inventory that isn’t selling. Put it up for sale, or bundle it with other products to show a great deal.
  • Cash you owe to your suppliers, that you pay too fast before it is due.

3. Owner Draw


  • It’s a great temptation to pull money out of the business when sales are booming.  An account opened at your favorite restaurant or three, the kitchen remodeled, a badly needed new wardrobe, that overseas trip you’ve earned after working so hard, a better quality of the wine, more parties thrown for your lovely friends…
  • Then, before you’re aware of it, all your hard-earned reserves have dried up and it only takes one downturn you see you in deep trouble. I’ve seen businesses here take over a billion out of there business in dribs and drabs and then wonder why they have nothing to fund growth.
  • So, pay yourself a modest salary, and stick to it. If you have a heap of money over at the end of the year, and more than you need to fund next year’s growth, then pay yourself a bonus from what’s left.

4.  Theft


  • US statistics say one-third of small business become bankrupt from theft and loss. The retail industry there loses an estimated $36 billion from theft and loss each year.
  • People can steal cash, product, needed supplies or your intellectual property – your ideas and processes. People include your customers, your staff, your competitors and you.
  • Theft can only be controlled; it can rarely be eliminated. So managing theft means that first you must make a risk assessment and determine your priorities.
  • Where are you most vulnerable?   Are your computers wide open to theft of your intellectual property while you’re busy protecting a dress or a bracelet?
  • Do you count your cash daily and reconcile against sales dockets and then against inventory changes?
  • Do you keep an eye on office expenses?
  • Are all your staff on the payroll actually working for you? How well can you tell if they are working for you only all day?
  • Are you losing money through sloppy control of working hours, holidays were taken, sick leave used?


Let’s count the ways of theft in the food industry where you must have processes to protect you in your restaurant.

  • Cash – out of the register, deposits, receipt manipulation.
  • Food and product – raw foods, packaged and tinned foods, meals
  • Customer information – credit card numbers, loyalty programs, customer list
  • Products and supplies – kitchenware, restaurant supplies
  • Intellectual property – recipes, business data, brand
  • Waitstaff – providing unauthorized discounts or free food to friends, eating or taking food for themselves, voiding items or checks and pocketing the cash, failing to properly ring items, inflating tips, credit card skimming.
  • Bar Staff – over-pouring drinks for bigger tips, ringing up with an open drawer, overcharging drinks.
  • Management – deposit theft, changing accounting records, adjusting sales receipts.


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