7 rules of cash flow management: Bashny.Net

1. Growth costs money

Paradoxically, the best times for the worst may be hiding. Tim Berry says that his company has experienced one of the most difficult periods as a time when sales doubled.

At this point the company, of course, began to expand its staff; while receipts from customers came with a six-month delay. It almost ended in disaster.
Of course, everyone wants to expand the business, but it should be remembered that the faster you grow, the greater the supply of money you need.

2. B2b-sale - not exactly selling

Formula "for sale = money" is true only in the market. In b2b this almost never happens. If customers are other businesses, the money for their goods / services can wait for months. As a rule, it is valuable customers, so use any harsh methods to recover the money can not be, otherwise they are you will not buy it. So you have to wait. If your company sells something to the distributor and the retailer sells it, you have to wait up to 4-5 months or even more.

3. The money - a commodity, but the commodity - is not money

A simple rule: every dollar you have in cash balances is dollars that you do not have to cash.

4. Debt - it is not money

The money that your customers owe you, your accountant calls "receivables". This reduces the cash flow: every dollar receivables - is a dollar that you do not have to cash. See. Rule 4, and 5.

5. Current assets - a pledge of survival

Accountant says that working capital - the difference between current assets and current liabilities. Head is better to consider them as money in the bank, which had to pay suppliers and pay current expenses in anticipation of revenue from clients. Naturally, this amount should not fall below the critical level.

6. Bankers hate surprises

They prefer plans. Do you need a loan? You have seen new opportunities for growth or new product launch? Or you have any problems with customer payments? The sooner you provide bank realistic plan, the wealthier will.

7. The three main indicators
Vital to cash flow management are three indicators: the average waiting period for payments from their customers, turnover period of inventory assets and the average period of delay payment of invoices from suppliers.

It is necessary to constantly monitor these indicators, schedule them for 12 months in advance, and then compare the plan with real events.