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Cash Flow And Its Role In Business
Maintaining a positive cash flow can be the difference between a great business and a disastrous one. The CPR of business cash flow is:
Collect all your accounts on time every time.
Pay your bills at the last minute.
Request cash or direct debit payments wherever possible.
Tip: Make sure you have enough profit in your products.
Cash, cash flow and cash collections
How many times have you heard “Cash is King”! Well he is the king.
Without cash flow you have nothing in the business and with that you have absolute power.
Just sit back and imagine running a business with lots of cash. Sounds good doesn’t it! But don’t get carried away just yet! Cash needs to be prepared before claiming.
You have to work out how you can get a reasonable constant cash flow and how we can keep it. You need to learn how cash flow works and what makes it appear and disappear.
Tip: In everything you do in business, you should base the CPR on business profitability – cash, profit and revenue.
· Without cash flow you have no flexibility or growth
· Without leverage you have no building blocks.
· You have no business without revenue.
Tip: It all comes down to managing your available cash flow.
What is cash flow management? Simply put, it is able to pay your bills as and when they fall due, along with your needs for business growth. The question is, can you do it?
Tip: If you can’t pay your bills when they’re due, seriously consider the following.
Have you made a sales forecast? Are you meeting your sales goals? If not, you won’t generate enough sales volume to pay for your overhead from the profits generated. Also, you need to accumulate enough money after expenses to allow extra cash for profits. If you haven’t, make some changes and sell more.
Tip: Make more sales using the Octopus system
Go to http://www.commandobusiness.com/octopus_system.php
Do you have a budget? If you’re paying more than your budget allows, you’re well on your way to breaking even. That’s why you have a budget! If followed it will not let you spend more than the allowed amount. If you’re spending too much, stop! Get off that cycle, take control, and stick to a budget.
Tip: Learn about budgeting and get out of a cash flow crisis
Go to http://www.commandobusiness.com/financial_crisis_%20part_two.php
The fastest way is to not send your invoices on time. Send them out early and collect them on time. Even if their dues are due within a day, remind your customers that you are not a bank and charge them overdue fees. They buy, pay and you collect. That’s how it goes.
Tip: If you are too soft to do it, be wise, outsource the job
Even if you can afford to pay your bills by the due date, only delusional people pay their bills early or on time. Pay them while you can. It is the cheapest form of financing you can have. Think about it. If your bills are the same as mine for $1,000,000 and I’m 21 days late without penalty, I’ll earn another $50,000 a year just in interest.
Note: If you are too soft to do so! Get out of business. You are no good to yourself or anyone.
How do you know if you’re in the middle of a cash flow crisis? Or even worse, if you’re not sure how to get out of a crisis when a few very simple strategies could have prevented it?
Here’s the first step to identifying if you have a potential cash flow problem. Ask yourself the following questions and give yourself the marks allotted for each answer.
Yes – 5 points
Sometimes – 3 points
No. – 1 mark
1. Do you have a sales budget?
2. Do you have an income and expense budget?
3. Do you know how much income you need to pay next month’s bills?
4. Do you mail out or ask for payment before it is due?
5. Do you pay your bills late?
6. Do you have a debt recovery process?
7. Do you reconcile bank statements against income and expenses twice a month?
8. Do you reduce overheads by 5% per month according to your estimate?
9. Do you apply and maintain a fixed profit margin on all products?
10. Do you cut unnecessary expenses (don’t turn $5 on the dollar) each month?
Know your scores and measure them against the following points:
0 – 25 You need to take drastic action to prevent a major crisis
26 – 35 You’re Just Running You need help, but don’t know it yet
36 – 40 You are fine but keep trying to improve
41 – 50 You are in the top 10% of business people. Don’t rest on your laurels.
If you like this article or want free tips and bits about business then visit http://www.commandobusiness.com
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