Guest article: Not afraid to look at liquidity – part 2

A contribution by Stefanie Kurzweil, owner of Semicolon Relations

I admit it honestly: after I had set up my Commitly account and categorised the first transactions, my account lay idle. The reason for that was not that something did not work. Quite the opposite, it worked far too well. The cash flow tool showed me my cash flow reserves point-blank and they were more than meagre. 3 customers had not paid and kept putting me off. On top of that, a larger fee note that I had firmly budgeted for remained unpaid without any warning. First for 1 month, then 2 and finally 3 months. And I had long since earmarked that income! I was in the middle of renovating my new office. Furniture had already been ordered, the first invoices had already been settled and new ones were lurking around every corner.

On top of that, I wanted to renew my homepage, which after a year no longer suited me and the company. New features, a new design, new photos for the website and the adjustment to the wretched GDPR were all due. Would the programmer I trust perhaps accept books as payment – because at that time those seemed to be my most valuable possession. In short: one look at my Commitly account and tears came to my eyes. So better not to log in again – or?

Wrong thinking!

Jürgen Faè, the founder of Commitly, made a study from the USA available at that time. Based on tens of thousands of transactions from small businesses, the vital cash reserves of small businesses were analysed. It shows that the average small business owner has, on average, a cash reserve that lasts 27 days. Expressed in figures: between 3,000 and 12,000 US dollars, with the majority clearly at the lower end. My first eye-opener: “I am not alone with my liquidity problem!” A good feeling, because who wants to feel like the only “failure in this world”? Exactly, nobody! This I-am-not-alone feeling was reinforced by another customer who announced that payment of the fee note would be postponed by a few days because he himself was still waiting for incoming payments. His words are still ringing in my ears ….

… Cash flow is a beast! So I even knew someone who was in a similar position to me. How reassuring and at the same time my second eye-opener.

The final eye-opener, however, was ultimately a question from Jürgen: would you rather know now that things will get tight in 1 month, or would you rather have found out only once the cash flow was negative? What a question, now of course! When the man is right, he is simply right. Now I could still act and manage my liquidity actively: postpone the website renewal, keep to the payment terms but not transfer the money the day the invoice arrived, agree instalment payments. Because one thing I knew of course: something would come in again and I even knew roughly which amounts would arrive when.

So open Commitly again and enter exactly those amounts. Along with my costs for the office refurbishment, timing the settlement of the outstanding invoices. And voilà … I was back in business.

What I learned from it?

We humans are emotional – we entrepreneurs too! And our sore point is not the budget for the coming year, but liquidity. Yet as long as we approach it purely on an emotional level, it frightens us all the more – when it happens to be low – because we do not look closely. Help, only 4,000 euros left in my company account… bang, blinkers, tunnel vision, restless sleep. But as soon as we take the emotion out of it and deal with it on a rational, structured level, liquidity is no longer a beast but a resource that can be actively managed. Commitly takes the emotion out where it threatens to gain the upper hand and directs our attention to what we want to achieve. With the liquidity plan in front of me I know what to do and what to keep my hands off. Or in plain language: I know what I have money for and what I do not. I also know what I will have it for in 2 months – or not. Or in 3, or 4 …

Credits: Photo by Green Chameleon on Unsplash