Thursday, November 10, 2011

Cash Flow - #1 Pain for Small Business Today

Do you have something in common with your fellow business owners? Are more and more people slow paying you?

Recently I conducted a survey of dealer/distributors around North America and for the first time Cash Flow was mentioned by the majority as one of their top 3 concerns.
The slow economy over the last few years is starting to take its toll. More and more owners cite slow paying customers as a growing problem.

What can you do about it? You see there are really 6 Levers in your business that effect Cash Flow. Looking at A/R only is only 1/6 of the problem. While we all can't be financial wizards, we need to gain a basic understanding of what we are dealing with and the actions we can take to manage this issue.

As with anything, we have to have a way to measure the variables (the 6 Levers) before we can even talk about managing them. Once we are measuring the right things, we have to set some targets or goals to improve them. This does not mean we have to be financial wizards or "numbers" people, we just need a grasp of the "Levers" that effect Cash Flow and a couple of simple formulas to measure how we are doing and where we want to go.

The numbers you need are on your balance sheet and financial statements. If you don't want to do it yourself ask your accountant to provide these numbers to you each week or month.

I have written a Free Guide - "Cash Flow : How Disney, Ford and Trump all went Bankrupt - A Simple Guide to Improving Your Cash Flow"

Here's an excerpt:

"As Michael Gerber says, "I remind my clients that Donald Trump, Henry Ford and Walt Disney all went bankrupt, even though their enterprises were earning income, because they ran out of cash! Most businesses without cash flow forecasting in place do not survive, while nearly all businesses with cash flow forecasting in place do."

Of course you know that cash is the fuel for your company. Like a $70,000 BMW, you can have a fast growing, profitable company and if you can't generate enough cash (fuel) for your tank you can find yourself sitting on the side of the road, out of gas.

The main quantitative measure of a business' success is not profitability (the excess of revenue over expense), it is the excess of cash flowing into the business over the cash flowing out. It is quite possible, and even common, for businesses to be profitable but be cash flow disasters.

Growth takes cash and lots of growth takes lots of cash. It is a sad fact that the majority of failing firms are profitable as they enter bankruptcy. No gas, no go."

It's yours free by simply clicking here.