There are two kinds of businesses--those that have had money problems and those that will have money worries. It is a simple fact of doing business that sooner or later you will run into financial problems.

A good friend of mine has been in business for over 30 years. About five years ago, at the age of 55, he almost went broke. I was amazed at how calmly he told me this story. Today he is the major shareholder and CEO of a company that turns over $300 million per year. That is the fickle nature of doing business.

I've had financial ups and downs over the years and I expect to have more. That said, I have learned a few things about dealing with money problems. Here are a few of my tips for avoiding financial problems:

  • Keep great records and enlist an excellent bookkeeper. Know exactly how much it costs to run your business each day, month and year. This gives you a target to aim for in terms of breaking even and making a profit.
  • Learn to manage your cash flow--it will break you if you don't manage it properly. This simply means staying on top of your invoicing (invoice promptly) and be really good at collecting the money you are owed. Sounds so obvious, so many businesses are terrible at it.
  • Don't spend the money before it arrives. You haven't got it till it is in your account.  
  • Work out if you are making money on the products or services you are selling. You might think you are, but on closer inspection, you may find that you are not.

If you do get into financial trouble, which means you are having difficulty paying your bills, these five tips will help you to get out of danger:

  1. Be honest with yourself about the situation. Don't ignore it or believe that some magical event will happen to fix everything. The sooner you face it the better.
  2. Get some advice. Professional advisors won't judge you, they are there to help. There are always options, even if it doesn't feel like it right now.
  3. Talk to a friend or mentor in business--odds on they have been through the same thing and they may be able to give you some really practical and helpful information. Plus it helps to be able to talk about your problems.
  4. Communicate to your creditors what the situation is and what you are doing about it.
  5. Generally, you will find that you have two very simple choices--reduce expenses or increase income. Ideally, do both. Having just two simple areas to focus on often makes managing the issues much easier.

And remember: worrying about money won't do much except give you an ulcer and turn your hair grey--it certainly won't make the money come in.

If money isn't a problem now, congratulations--but don't get too complacent. If you are seriously worried about money, follow my tips and do something about it. Believe me, you will feel much better knowing you are taking proactive steps to resolve the situation.