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:
In short, you free yourself to focus your unique talents and abilities on growing your business rather than fighting the constant cash flow fires.
Here are 10 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 the kind of financially successful business you deserve.
Running out of cash is the definition of failure in business. Make the commitment to do what it takes so it does not happen to you.
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.
Remember, Cash Is King, because No Cash = No Business.
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. That's the reason why business failures are not limited to amateurs or people new to the business world.
The key to keeping an accurate cash balance in your accounting system is to do today's work today. When you do this, you will have the numbers you need - when you need them.
Here is a simple rule to follow to make sure you have an accurate cash balance on your books. You do the work or have someone else do it.
Those are the only two choices you have. The work must be done. It's like mowing the lawn. You can't just ignore it. Someone has to do it. That means either you do it or have someone else do it.
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.
What do you expect your cash balance to be six months from now? This one question will transform the way you manage your business.
This question really gets to the heart of whether you are managing your business or whether your business is managing you.
You would be shocked and amazed at the number of businesses that fail because the owner did not see a cash flow problem in time to do something about it.
The key is to always be able to answer the question - what do I expect my cash balance to be six months from now?
Cash flow projections are the key to making wise and profitable business decisions. They give you the answer to the all-important question from Rule # 7.
It's impossible to run your business properly without them.
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.
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. In subsequent columns, I will delve into the specifics to help you achieve each step.