Cash flow problems mainly symptoms.

Is what you perceive as a cash flow problem just a symptom?

Most people have cash flow problems at one time or another. When this occurs, look for the symptoms. They show up long before your cash flow becomes a problem.

The most common symptoms are a drop in sales, a string of slow-paying customers, an inventory of slow-moving or dead stock, or a yard full of obsolete equipment rusting away.

Cash flow is the single most important concept in business.

Cash flow problems can destroy a business faster than most other issues. They can creep up on any business, but smaller businesses are usually the most vulnerable. It can be difficult to adapt quickly to today’s ever-changing business pressures without adequate working capital.

Fortunately, cash flow problems are predictable and aren’t entirely out of your control. You can avoid many sleepless nights by understanding the symptoms of cash flow problems. Cash flow problems are the most common frustration of businesses, mainly when they are in a growth cycle. 

Don’t use short-term working capital to fund long-term assets. Working capital is used to finance your day-to-day operating expenses.

Avoid cash flow surprises.

Plan your capital requirements, prepare accurate budgets, and update your business plan well in advance. Ensure your business model works well all day, every day, to avoid surprises. Focus on making sales first, raising capital second.

If you do this well, you might just avoid going into more debt. Do you feel you will not be good at handling the financial aspects of the business? If so, your time may be much better spent taking control of opportunities that will increase revenue and profits rather than sweating over the money. Outsourcing to financial advisors, bookkeepers, and accountants can also be very cost-effective.

Evaluate your systems and business processes to see what needs improvement or tightening. Have confidence in your systems and processes, and ensure they keep working even when things get tough. Harness your strengths and take the actions that will forever rid you of cash flow problems.

Just because your business makes good profits is no good reason to start spending. The more you put money back into the organisation, the faster you’ll be able to grow and the more profitable your business could become in the future. Building financial reserves can eliminate your cash flow problems forever. A penny here and a dollar there, placed at interest, goes on accumulating. In this way, the desired result is attained.

Many businesses fail because the owner isn’t willing to invest sufficient working capital. Others are surprised because they weren’t educated on the difference between spending frivolously and investing money into the business for growth. Many others fail, not because of a lack of assets. Not understanding the risks and rewards associated with cash flow can be playing with fire.

Focus on the critical cash flow areas.

Quotable quotes

“Happiness is a positive cash flow”. Fred Adler

“Number one, cash is king… number two, communicate… number three, buy or bury the competition”. Jack Welch.