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Cash Flow And Its Role In Business

 


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By Maintaining a positive cash flow can be the difference between a great business and a disastrous one. The CPR of business cash flow is:

COLLECT all your accounts on time every time.
PAY your bills at the last moment.
REQUEST cash or direct debit payments wherever you can.

TIP: Ensure you have enough profit built into your products.

Cash, Cash Flow And Cash Collection
How many times have you heard it said, “Cash is King”! Well IT IS KING.
Without cash flow you have nothing in business and with it you have absolute power.

Just sit back and visualise yourself as having a business with plenty of cash. Sounds great doesn’t it! But don’t get too carried away just yet! The cash has to be produced before it can be claimed.

You have to work out how you can achieve reasonable continual cash flow and how we can keep it. You need to learn how cash flow works and what makes it appear and disappear.

TIP: In everything you do in business, you should be based around CPR of business profit – Cash, Profit And Revenue.

  • Without CASH flow you have no flexibility or growth
  • Without PROFIT you have no building blocks.
  • Without REVENUE you have no business.

    TIP: It all comes down to managing your available cash flow.

    What is cash flow management? Simply put, it is being able to pay your bills when and as they fall due including your requirements for business growth. The question is can you do that?

    TIP: If you can’t pay your bills when they fall due, consider the following seriously.

    Sales
    Have you budgeted a sales forecast? Are you meeting your sales targets? If not, you may not be producing enough sales volume to pay for your overheads from the profit generated. Also, you have to build up enough money after costs to allow a surplus of cash for profit. If you haven’t, make some changes and make more sales.

    TIP: Make more sales by using the Octopus System

    Go to http://www.commandobusiness.com/octopus_system.php

    Expenses
    Do you have a budget? If you are paying out more than your budget allows, you are on the short road to going broke. That’s why you have a budget! If followed it won’t let you spend more than the allowed amount. If you are spending too much, stop! Get off that roundabout, take control and stick to a budget.

    TIP: Learn about budgets and get out of a cash flow crisis

    Go to http://www.commandobusiness.com/financial_crisis_%20part_two.php

    Collections
    The #1 fastest way to go broke is by not sending your invoices out on time. Send them out early and collect them on time. Even if they are over due by one day remind your customers that you are not a bank and charge them an overdue fee. They buy, they pay and you collect. That’s how it works.

    TIP: If you are too soft to do that get wise, outsource the job

    Bills
    Even if you can afford to pay your bills by the due date, only the disillusioned pay their bills early or on time. Stretch paying them out as long as you can. It is the cheapest form of financing you can have. Think about it. If your bills are like mine $1,000,000 a month and I delay that for 21 days without penalty, I’ll earn another $50,000 a year just in interest.

    TIP: If you’re too soft to do that! Get out of business. You’re no good to yourself or anyone.

    Conclusion
    How do you know if you are in the middle of a cash flow crisis? Or worse still, what if you are not sure how to get out of trouble when it could have been avoided with some very simple strategies?

    Here is the first step in identifying if you have potential cash flow problems. Ask yourself the following questions and give yourself the allocated points for each answer.

    Yes - 5 points Sometimes - 3 points No - 1 point

    1. Do you have a sales budget?
    2. Do you have an income and expenses budget?
    3. Do you know how much you need to generate to pay next months’ bills?
    4. Do you mail out or ask for payment before it is due?
    5. Do you delay paying your bills?
    6. Do you have a debt collection process?
    7. Do you reconcile bank statements against income and expenses twice a month?
    8. Do you cut overheads by 5% each month against your forecasts?
    9. Do you enforce and maintain a set profit margin on all products?
    10. Do you cull unnecessary expenses (don’t return $5 on the dollar) each month?

    Work out your points and gauge them against the following scores:
    0 – 25 You need to take drastic action to avoid a major crisis
    26 – 35 You are just plodding along you do need help, but don’t know it yet
    36 - 40 You are doing OK but keep looking to improve
    41 – 50 You are in the top 10% of business performers. Don’t rest on your laurels.

    If you enjoyed this article or would like FREE tips and bits about business go to http://www.commandobusiness.com

    Dan is an Australian businessman his expertise is in the creation of businesses and building them to full potential. If you really enjoyed this Article you can find more at
    http://www.commandobusiness.com

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