This week I would like to detail an insightful article from fellow Partner David Kirkup
When it comes to properly managing the cash flow of your business, the best way to move from where you are now to where you want to be is to get a clear picture in your mind of the benefits you will enjoy as you take control of your cash flow.
The benefits include:
• Increasing the likelihood that your business never runs out of cash.
• Eliminating the constant worry associated with not knowing what your cash balance is right now or what you expect it to be next week.
• Improved relationships with your vendors because they are no longer banging on your door demanding that their past due invoices be paid immediately.
• The ability to see cash flow problems long before they can happen.
In short, you free yourself to focus on growing your business rather than fighting the constant cash flow fires.
Here are 7 cash flow rules you can implement immediately that will transform the way you manage your business from this point forward. These rules are the keys to creating a successful and valuable business.
1. Cash Is King. It’s important to recognize that cash is what keeps your business alive. Manage it with the care and attention it deserves. It’s very unforgiving if you don’t.
2. Know the Cash Balance Right Now. What is your cash balance right now? It’s absolutely critical that you know exactly what your cash balance is. Even the most intelligent and experienced person will fail if they are making business decisions using inaccurate or incomplete cash balances.
3. Do Today’s Work Today. The key to keeping an accurate cash balance in your accounting system is to do today’s work today – or ensure that your book-keeper stays up to date. When you do this, you will have the numbers you need – when you need them. Produce daily, weekly cash updates – QuickBooks makes it easy.
4. Don’t Manage From the Bank Balance. The bank balance and the cash balance are two different animals. Rarely will the two ever be the same. Don’t make the mistake of confusing them. It’s futile (and frustrating) to attempt to manage your cash flow using the bank balance. It’s a prescription for failure. You reconcile your bank balance. You don’t manage from it.
5. Know What You Expect the Cash Balance to be Six Months from Now. What do you expect your cash balance to be six months from now? This question really gets to the heart of whether you are managing your business or whether your business is managing you. Do you have a financial plan with long range cash flow projections?
6. You Absolutely, Positively Must Have Cash Flow Projections. Cash flow projections are the key to making wise and profitable business decisions. It’s impossible to run your business properly without them.
7. Eliminate Your Cash Flow Worries So You Are Free to Do What You Do Best – Take Care of Customers and Make More Money. This is the real key to your success in business. The reason you have to make sure you have the cash flow of your business under control is so you are free to focus all your time and talents where you can make the most difference in your business. You are the Finder.
When you have your cash flow under control, you are free from worry, doubt and concern. You have the cash flow information you need to make sure that everything you do each day in your business is clearly focused on making your business better. You have the information you need to measure your progress using the amount of cash you generate (and keep) for yourself and your business as your ultimate financial measurement.