Why Cash (Flow) is King

One of the biggest issues affecting businesses is their ability to successfully manage cash flow. When done incorrectly, businesses don’t survive for very long. This is why the phrase “Cash is King” rings true. In fact, when examining failing businesses, over 82% labelled cash flow issues as one of the main causes of their failure.

Cash flow can be mismanaged in a variety of ways:

• Mismanagement of receivables
• Cost tracking
• Failure to plan strategically
• Inconsistent pricing
• Unrealistic goal setting

Reputation is important. If your cash flow isn’t being managed properly, you may not be able to pay your suppliers, bills and debts on time.

Credibility is as much a resource as cash. If you are constantly running behind and playing catch up with your debts, your service partners are far less likely to give you a grace period during a genuine crisis.

Businesses and organizations that fail to plan strategically and set realistic goals, are more likely to fail. Optimism is important in any organization, however, it takes experience to balance what you dream to happen, with the reality of what most likely will. This is why it is sometimes better to outsource cash flow management and strategic planning to organizations with a proven history of effective support.

The Positives of Cash Flow Management

Remembering “Cash is King”, proper cash flow management can help you overcome any difficulty and future-proof your business or organization against surprises down the road. While often overlooked, effective cash flow management and strategic planning is the number one thing you can do to grow and maintain your business.

Cash on hand

Many businesses have succumbed to bankruptcy not because they weren’t profitable, but because they didn’t have enough cash on hand. Monthly expenses weren’t covered and their competitors took over the market and their business.

Having cash on hand brings with it a sense of security. To know that if disaster should strike, you have enough to pay wages, buy supplies and cover other costs, puts you ahead of those businesses running hand to mouth each month with their own cash flow.

When you work with us, we can help you build that sense of security by making sure you will always have more cash on hand than you’ll need to spend.

Employees and Customers

Employees and customers are two of the most vital components of your business. Yet, in times of crisis, they are often overlooked or mismanaged. Good cash flow management will enable you to build trust with your employees. If the worst happens, you will be prepared and able to continue paying them for their services, until the crisis has passed. Many companies were caught during the pandemic, and it was often lower-level employees that paid the price for a lack of preparedness.

The same is true of the damage to customer relationships and loyalty as a result of passing on the cost of poor cash management to your customers. Failing to deliver promised goods and services on time or having to increase the cost to meet cash demands is a sure-fire way to see your customers driven to businesses that better reflect their values and reward their loyalty.

At Part Time CFO, we offer a range of services to help you get your business back on track. If you are experiencing cash flow challenges, looking for experienced strategic planners, or need help with accessing finance, why not connect and see how we might help get your business organized to optimize cash flow and create realistic strategies that will see you start to thrive, instead of just survive. Contact Us