Phones are ringing, orders are streaming in and your sales department is a beehive of activities. Your business is doing well, the mood is ecstatic. The store person walks to you and breaks unpleasant news, stocks are exhausted. You quickly ring your suppliers and each supplier, as if choreographed responds, “We can’t supply till you pay the outstanding amounts”.
You call your accountant and ask her how much money the business has. She says there is very little cash, but quickly assures you that there are receivables which if you collect; the business will have more than enough money to buy stocks. You ask your assistant to call all the debtors and collect outstanding money. Meanwhile, you call the bank, for quick working capital. In your mind, either of these two must come through for you.
By end of day, you call your bff to explain you have no money to buy stocks and you have lots of orders pending. She does not have any cash either; all orders for that day are delayed.
The next day is no better, and customers start asking for alternatives, to which you direct them to your competitors. It is a sad state of affairs and each passing day, the mood in your business dampens, and activities slowly grind to a halt. Where did I go wrong? you ask yourself; with no answers.
Many times we hear an investor say, I will make loads of cash from this idea, so let me put in all the money that I have. Yet she doesn’t consider the day to day cash needed to sustain the business and her life. Such a #MotherlandMogul who underestimates the power of money sets herself up for failure. Money dictates the pace of growth for our businesses, and also the pace of progress of our lives. The absence of money brings business to a standstill and slows our lives down.
Planning cash flows is tantamount to respecting the King. Cash must circulate in your business, from your financiers and customers, to be used for purchasing inventory or stocks, investing, paying for labour and some lying around in a bank account to handle emergencies.
All these activities are so important for your business survival, neglecting any of them, or leaving it to chance is a quick way of muzzling your business to death. In this series of articles and guides, we are going to breakdown cash flow management’s concepts to help you manage your King in a way in which he will flow, without any turbulence, and provide your business with the much-needed growth.Learn the basics of cash flow analysis with @SheLeadsAfrica & @StanChartKE #MoneyMakingMogul Click To Tweet
Tight Money (Guide)
The cash flow cycle explains the physical flow of money in your business, from the moment you receive it, through utilising it to pay for your expenses, all the way to banking and using it to produce goods and services.
Show Me The Money (Guide)
We then delve into the best time-tested strategies for managing cash. Here, we discuss how much money you need to have idle around your business waiting to be spent, what you need to do to manage suppliers and the people who owe you, when to turn to debt and when to dispose your inventories, even if it is at a loss.
A stitch in time… (Article)
Timing your cash flows to coincide with your outflows is quite a serious strategy in the process of managing cash. It is important that your big expenses are undertaken when you are expecting your big payments from your customers or an inflow from your financier, be it a loan or a grant, or an injection of capital.
Cash in itself can be an investment. That means by having liquid cash, you can keep it in a form in which it earns interest instead of keeping it under your mattress. Money can be invested to earn a return while waiting to be used in the business. Concepts around managing liquidity, investing excess cash, earning or paying interest and banking will be discussed in our last article on cash flow management.
Cash is King. No queen ignores the king. If a #MotherlandMogul ignores the King, it can only be to her own detriment.