Are you happy with your cash flow?
Of course not. Nobody is.
But do you know how to improve it?
No. Not if you follow the usual advice!
Paul Fifield – “one man in his time plays many parts …”
Let’s talk about cash…:
- What is Cash Flow?
- Movement of money into or out of a business, project, or financial product
- Cash inflows (or money in) can be generated through the sale of goods or services, money earned through investments or money borrowed
- Cash outflows (or money out) cover the payment of expenses, payments to suppliers and buying equipment.
- Positive cash flow is when a business is generating more cash inflows than outflows. Negative cash flow is when cash outflows outweigh cash inflows.
- Why is Cash Flow Important?
- Lack of cash is one of the biggest reasons small businesses fail.
- The Small Business Administration says that “inadequate cash reserves” are a top reason startups don’t succeed. It’s called “running out of money,” and it will shut you down faster than anything else.
- “Entrepreneurs believe that profit is what matters most in a new enterprise. But profit is secondary. Cash flow matters most.” —Peter Drucker
- How can/should you “Manage” Cash Flow?
- Advice varies but usually includes suggestions such as:
- Encourage your customers to pay you faster
- Pay your own bills a bit slower
- Purchase less inventory and keep less inventory on hand
- Follow up on bad debts
- Establish a line of credit or other type of business loan
- Advice varies but usually includes suggestions such as:
- Unless you thrive on constant fire-fighting, have you thought about where tomorrow’s Cash Flow will come from?
- Don’t answer that…
Obviously the best way to improve cash flow is to generate more, not simply reduce outgoings.
Let’s start by thinking about where Cash Flow comes from – Customers.
How can you ‘make’ customers give you more money?
Let’s talk about Customers…