Cash Flow is a big deal

Episode 30 of the Simplifying Tax and Accounting from I Hate Numbers: podcast, hosted by I Hate Numbers, titled "Cash Flow is a big deal" was published on September 20, 2020 and runs 14 minutes.

September 20, 2020 ·14m · Simplifying Tax and Accounting from I Hate Numbers:

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Episode Description

Cash Flow is a big deal. Everybody wants their business to survive. Everybody wants their business to grow prosperously.

Cash Flow is vital for your business. Without it, your business is on a one way trip to disaster. In this weeks podcast episode of 'I Hate Numbers' I want to stress the importance of cash flow, discuss what it is and how you successfully manage it in your business.

The costs of your business need to be met and you need cash for that. Staff must be paid; overheads covered, loans paid, and your need to pay yourself. Those bills and commitments need to be settled in cash, not promises.

Cash is important

Cash is necessary in any business of any size. If you fail to get adequate cash flow then your business will inevitably fail. A lot of businesses can survive periods of low profit, even losses!. To do that you need access to cash. Strangely enough, profits and cash aren't the same thing, profitable businesses can fail, loss-making businesses can survive. Strange but true

Cash Flow is the most important aspect of your business. And if you don’t have the right Cash Flow and know how to manage it then your business is done for. Finished. Forecast for the year and amend as you proceed and if you can’t do that then do what you can.

Cash forecast

Cash Flow is a big deal, and we need to own it, and manage it. You need to create a cash forecast for your business. Look ahead, and think about what your business activity, your business story looks like. Once you’ve got an idea of that then forecast the months ahead based on that future as best you can.

Three things for your consideration. Firstly, produce a cash forecast then a cash budget, a cash report for your business is finding out the details. Forecasts and projections will detail your story and should be done typically for 3-6 months but preferably 12.

Your cash future is based on asking three key questions

What is the future activity that impacts on money in or money out
When does that cash event occur, in which month or week
How often does that cash event occur

Don't even bother with numbers at this stage. When you figure what your future may look like then translate that activity into a financial number. Once you have a cash story then the power and magic happens.

In a forever changing world when anything can happen at any given moment you should always plan for contingencies. You never know what's next and one day your business will thank you for it.