Cash Flow Is King

15 May, 2020

If there is anything that we have learnt over the past two months, it is that you can never take anything for granted and things can change in a heartbeat.

It is now more important than ever that as a business owner we keep in mind the following things:

• What is our current position?
• When are we going to make the sales?
• When are we going to get paid?

None of these things are new, but we have grown out of the discipline to monitor and complete these.

So let’s break it down…

• Your current position: This is as simple as what we are on and what you owe. No fancy jargon or technical terms, there it is easy to calculate and it doesn’t really matter what the result is as long as you know where we are starting from. What will change with the value of this number are the options that you may or may not have.
• Your budget: In simple terms, when are you going to make the sales and when are you going to incur the costs.
• And last but not least, the cash flow: You’ve done your budget so you know when you’re going to make the sales and when you’re going to incur the costs, but how you actually receive the money and how you actually pay the money can be two very different things. Given the changes that have happened to businesses over the last two months, there is the likely possibility they may take you longer to get paid; the hundred thousand dollars worth of work you completed in May, instead of getting paid on 20 June you may only receive a portion of it in June and a portion of this in July.

It is critical that businesses keep an eye on the cash flow, both in and out, to ensure that you have the funds to operate and keep the business viable.