Cash
Flow Management
In
order to stay in business, it's important to have the fundamentals right.
Managing the cash flow of your business is a very basic fundamental. Cash is
literally the life blood of the business. If a business isn't adequately
capitalized, it won't survive.
Many
businesses are founded "on a shoestring." They grow by reinvesting the
earnings of the business. If the owners withdraw the earnings to support a
lavish lifestyle, they've put the cart before the horse.
Most
businesses experience cycles of good and bad times, growth and retraction.
Without accumulating a "war chest,” the business will be unable to
survive downturns. Further, without reinvesting earnings, the company will be
unable to exploit opportunities of good times by financing expansion.
Many
founders of now-prominent companies lived modestly, even after their companies
became successful. Some examples are Sam Walton, David Packard and Bill Hewlett.
These people habitually avoided extravagance because they focused on building
something significant. The financial systems of their companies are exemplary.
They recognized that managing the finances of their organizations was
fundamental for survival and growth.
It's
good to enjoy the fruits of your labors -- after the harvest. Remember not to
consume the seeds for next year's crop.