The Importance of Cash
Flow
The importance of cash flow to
a business cannot be overestimated. Cash is the
lifeblood that flows through the veins of a
business. Without cash it is not possible to pay
suppliers or employees and very soon any business
will find itself forced to close down. There is an
interesting saying:
Sales are insanity
Profits are vanity
Cash is reality
In fact:
A sale is not a sale
Until you have the cash
Unfortunately many business owners forget the
importance of cash flow to business development.
Many businesses are started on a shoestring and grow
by using creditor's money, the bank's money and
occasionally by reinvesting the profits that are
made. Business owners feel that they should have the
highest salary and drive a big car, often before the
business can afford either. A business requires cash
flow in order to remain stable and to grow.
It is a nice little paradox that the longer you
are able to resist taking money out of the business
so that the business can develop the wealthier you
are liable to be in the long term. It is good to
enjoy the fruits of your labour – that is why you
went into business. But you must make sure that you
have left something for next year.
Do you ensure that you have enough cash to pay
your creditors on time, to fund your expansion plans
over the next twelve months and sleep easily at
night? If not I suggest you take steps now to
increase your cash inflows and reduce your cash
outflows.
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