Cash is king, especially for small and medium businesses (SMBs), which do not have access to capital markets. An unprofitable company with cash can limp along for years, but a profitable company without cash will fail in a few months. How is this possible?
Your business uses cash and cash equivalents to pay its bills. A somewhat unprofitable company (i.e., a 10% net loss) that requires customer deposits, pre-pays, and/or payment at the time a service is delivered for all its sales, will have positive operational cash flow. Money it can use to pay the bills. A company that requires no deposits, pre-pays or payments when the service is delivered, that has accounts receivables that are 90-150 days outstanding, will be hurting for cash. Literally. Hurting. Where’s the money to pay the bills? Even with that 15% profit? It’s in the A/Rs! Or it’s in the inventory.
Watch the video to find out; in addition, access insights and tips for managing cash. Cash flow management is the methods you use to manage all aspects of your cash flow – operational, financing, and investing. For stable, steadily growing businesses, operational cash flow is the primary focus. For rapidly growing businesses or start-ups, all three sources and uses of cash are significant.
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