What is my cash balance right now?
2. What do I expect my cash balance to be six months from now? If you can answer each of these questions with a number, then you have your cash flow (the lifeblood of your business) under control. If you can’t answer each of them with a number, then you don’t have your cash flow under control. You are not properly managing the most precious asset your business owns. Cash Flow Problems Don’t “Just Happen” I used the two questions recently with our family finances. I had decided to take some time away from day-to-day business and devote my attention to researching a business idea that had been rolling around in my head for a while. About mid way into the research, I answered the two questions regarding our family finances. I didn’t like the answer to question # 2. I looked at the number for what I expected our cash balance to be six months from now and I didn’t like the answer. I took the time to think through what I wanted the cash balance to be. I then considered how I could make that
– What do I expect my cash balance to be six months from now? If you CAN’T answer these two questions, then strap yourself in for a wild ride. You are on a roller coaster ride that’s about to become really frightening. On the other hand, when you CAN answer these two questions, you have just regained control of the financial side of your business. You will experience the almost magical feeling of control that comes from mastering this critical part of your business. You will feel like I did back in 1991 when I first discovered the secret to taking control of the cash flow of any business. I was amazed how simple the solution was and how it transformed the way I managed the business from that point forward. NEVER RUN OUT OF CASH Remember, it’s all about the cash. If the cash ever runs out, then everything you worked so hard for goes right down the toilet. That’s why the financial side of business is so crucial to your success. Take the time to ask and answer the two critical cash flow q
• What do I expect my cash balance to be six months from now? The first question is simple, yet fundamental. Part of what Philip urges his readers to do is to keep the books up to date. If you don’t have time to do it yourself, pay someone else to do it. But is the amount of cash in your bank account the amount you have to work with? This is why Philip poses the second question. If you go through the analysis to see what you’ll have in six months, you have to examine what happens to that cash over time. If there is seasonality to sales or inventory buying, it might mean that your $50,000 will be used up over the next 3 months without any change to your fundamental business. A couple of nights ago, I attended a finance committee meeting of the board of a homeless organization I serve on. I had been Treasurer the previous two years, and had done some cash flow modeling for them early in my tenure – so I was familiar with the pattern of cash coming in and going out. The board President as
