You know what !! Cash is King !

- - Advice

People start their business with a bang. But within a few years, they shut down their businesses.

Do you know why?

It’s because of the CASH FLOW! And we all know “Cash is King!”

Since businesses couldn’t manage the cash flow, they are left with no option other than to shut down.

According to a survey, 82% of businesses fail due to poor cash flow.

Let us understand what cash flow means?

Cash flow is the lifeline of your business.

Cash flow is a movement of cash that comes in and goes out of your business in a particular period.

When you have positive cash flow, you have more income coming into your business – so you can pay your bills and cover other expenses. When you have negative cash flow, you can’t afford to make those payments.

The concept of having enough money to meet your financial obligations is also known as working capital.

There is a famous saying in business: “Revenue is vanity, profit is sanity, cash is reality.”

Simply, financial management begins and ends with cash. If you don’t have money on hand for your business needs, you start hitting blockers in your operations.

Learning to manage cash flow is a foundational building block for managing your business finances. Once you master it, you can track all your finances.

Let me share with you how businesses manage their cash flow.

Five thumb rules every business should keep in mind to manage the cash flow –

  1. Keep your account books accurate and up to date.
  2. Please don’t be lenient with your customers.
  3. Keep accounting simple.
  4. Keep business and personal finances separate.
  5. Must build a cash reserve.

Now let me explain to you in detail :

  1. Yes, bookkeeping matters! It is the best way to understand the financial transactions of the business.
  2. It is better to have an accountant to generate cash flow statements for the business.
  3. One has to know how money is moving in and out of your business.
  4. Analyze whether there is a need to increase cash flow. Are you relying on your credit card or other financial sources to make ends meet?
  5. Cut overspending to increase cash flow.
  6. Speed up the long-pending accounts receivable from the clients. The faster you get money in your pocket, the more cash flow you will have.
  7. You have to master stock management. Buy only what is necessary to avoid unnecessary blockage in the stock so that you can use the same amount at other places.

I am doing different businesses for more than 15 years now and I have to stop many businesses because of cash flow issues and still trying to tackle with it new businesses as well and I am learning it and will master it soon.

It’s pain to see businesses shutting down. And cash flow management is not a piece of cake.

I hope after reading this, you will get some insights about cash flow and its importance. It is for everyone who is already running a business or who wants to start one!!

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I’m Nishanth Muraleedharan aka "Nishani" and I know that I have come into this world with a clear purpose and mission: • To help people to have financial freedom & more free time by doing Internet based Businesses. I've been involved with Internet based businesses for over 18+ years now. Some of my inspiration comes from Jeff Bezos, Elon Musk, Mark Zuckerburg, Sergey and Larry Craig