Bills tend to happen in spite of planning and they seem to happen faster than you plan. Gaining control of bills or debts is a constant balancing act. And while you’re working on those issues, you’re also managing payroll—the one thing you don’t want to mess up. Paying bills can feel like taking fastball pitches at major league baseball game; you barely have time to prepare as the ball comes whizzing at your head.
Breaking It Down
Start with a game plan. There’s no better place to organize a cash flow game plan than a 13-week cash flow model. The model empowers you to be proactive about all your cash flow out three months at a higher level and to detail an action plan for the next three weeks, which is the time period most people care about from a bill-paying perspective.
Break your game plan down into two sections: three weeks and three months. (We’ll assume you’ve already reviewed your sales and collections. If not, go back and do that first.) The first three weeks are a place to get granular – who’ is going to get paid. While in the subsequent three-month (10-weeks) period, we only care if we have enough cash to pay the bills in general, without deciding exactly which vendor gets paid.
Even though one benefit of a cash flow model is to identify what you need to pay, it’s not meant to replicate your accounting or ERP systems. Cash flow models are metrics. The point is to get a certain bit of information out of them and no more, so you can get back to running your business.
7 Steps to Regain Control of Your Business Debt
- Have a template
- Break down time
- Distinguish between expenses and disbursement timing
- Make simple categories
- Get the 3-week details
- Make payroll
- Make the 10-week plan
Pile on the Data
Next, gather data. Bill paying data comes from several piles: Accounts Payable, Accruals, and your checkbook. Scan all of these accounts, and you’ll be ready to manage your bills in the short-term.
This three-week period gives you a chance to manage your bill pay around payroll in week one and/or two and/or week three. Review this time period carefully—it will allow you to pinpoint both when you can meet payroll and which bills within a one to two-week timeframe can be paid.
Now you have a short-term strategy that dictates whether you can to get back to work or if you need to scramble to build up short-term liquidity. With practice, you’ll start to anticipate these pitches and have more time to react.