When You're In Business, Cash Is Always King!

''Turnover is vanity, profit is sanity, cash is reality'' You may have heard this saying, but what does it actually mean?

Far too often small businesses are profitable, but they do not have enough operating capital to meet their current needs. It is critical that it is understood where cash flow comes from and how it is spent, since this can make the difference between financial success and complete disaster.

The purpose of cash flow forecasting is to predict at what point the demands on an organization's cash resources become so great that the cash is exhausted, whether from normal business demands or planned growth. When operating cash flow is negative, there are four levers that can be pulled to improve it:

Even with an upturn predicted, cash is still tight and customers are much less likely to pay within 30 days, if at all. Here are a few tips to help you manage cash flow in your business:

The two other main areas where you can control cash flow are stock and suppliers. Keep a close eye on your stock, as perishable stock or slow moving stock can suck cash unnecessarily from your business.

Finally, check your suppliers' credit terms and use them. Bear in mind however that your long term relationships with your suppliers are the lifeblood of your business and they will respect you and respond to your needs if you always pay on time.


If you're interested in coaching your small business, call me on 07521 790284 and let's see how I can help you.