“Never take your eyes off your cash flow because it’s the life blood of your business.” – Richard Branson
As a CPA, I understood the importance of cash flow, but it wasn’t until I heard this quote that I had the epiphany that a company’s cash flow could determine if it stays in business or not. What I have also discovered over the years is that the biggest challenge business owners face is managing their cash flow, which hinders them from growing their businesses. Even more surprisingly, business owners know nothing about cash flow, except that they need more.
It is public knowledge that only 4% of businesses in America will continue to operate beyond the 10-year mark. One of the biggest reasons of business failure is cash flow problems. Cash flow is the movement of money into and out of your business. Cash is used to pay the bills, pay yourself, and build a cash reserve to be used in the business. This is completely different from your profit.
How do you identify a cash flow problem?
A business with cash flow problem will experience one or more of the following symptoms:
1. Struggle to meet payroll every month
2. Struggle to pay taxes (sales, payroll, income tax)
3. Constant overdraws bank account and have excessive bank fees
4. Feel overworked but not seeing the financial reward
5. Always worried about where the money will come from
6. Increase in credit card balances, bank loans, and debt
7. You are working hard and have good sales but there’s never enough money.
8. Have a good revenue/sales – but don’t understand why your business is still cash poor.
9. You consistently have to delay paying yourself
10. You don’t know your overall cost of doing business
11. Your bank statement shows you made more revenue but you don’t see any additional cash in your business
12. Sleepless nights worrying if your business will survive this cash shortage.
If you are interested in learning more about cash flow, here is a free case study to learn more. Click Here to Download