Four Cash Flow Rules

(Yes, accountants love rules)

Okay, silly question – why do you need to concentrate on Cash Flow? Simply put, especially for a small to mid-sized business, cash flow equals life, growth, prosperity . . . and survival.

You as an owner need to free yourself to focus your unique talents and abilities on growing your business rather than fighting the constant cash flow fires. Remember . . . you are the only one who really cares about the ongoing viability of your company. It’s your future that you are most concerned about because, if your company is not successful, no one will have a job.

If you don’t already have tools and rules in place, here are Four Cash Flow Rules you can implement immediately that will transform the way you manage your business. But first, remember the two cardinal rules of managing a business:

  •  Never run out of cash. Make the commitment to do what it takes so that it does not happen to you. Ask anyone who has missed a payroll tax deposit.
  •  Cash Is King. Cash is what keeps your business alive. Manage it with the attention it deserve and you will sleep better at night.

Now, the rules . . .

  1. Know the cash balance right now. Even the most intelligent and experienced person will fail if they are making business decisions using inaccurate or incomplete cash balances. Make sure this is what I call your checkbook balance. If your accounting is not up to speed daily, you can make a fail mistake. Remember, the bank balance and the check book (or General Ledger balance) are not the same.
  2. Do today’s work today. The key to keeping an accurate cash balance in your accounting system is to do today’s work today. When you do this, you will have the numbers you need—when you need them. If your accounting is behind, you can still devise a simple spreadsheet to keep track if necessary, but the process of accounting should be timely, complete and accurate.
  3. Either you do the work or have someone else do it. Those are the only two choices you have. The work must be done. And, by the way, if you are doing the work yourself, you may not have the right people working for you. Unless you are a start-up business without any accounting staff, you must be sure that the financial people know that you need and demand that they focus their efforts on monitoring the cash balance, and keep you aware of what’s happening with your cash.
  4. You absolutely, positively must have cash flow projections. Cash flow projections are the key to making wise business decisions. It’s impossible to run your business efficiently without them. Another truth is that this should be a natural product of a well-run accounting process.

By eliminating your cash flow worries you are free to do what you do best—take care of customers and grow your business. If you aren’t doing this, most likely no one else is. The more time you spend either caught up in the cash flow process or stressing out about it or both, the less time you have to focus on your success.

B2B CFO specializes in helping business owners manage their cash flow. Give us a call for your free Discovery Analysis, step one in our GamePlan process. It’s a call worth making.



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