Business leaders don’t understand cash flow

Business owners and leaders often don’t understand cash flow, let alone manage it. The numbers can be so complicated that they almost serve no value to the business owner to run the business.

Business leaders need to know their numbers. Hence they need to learn more about cash flow.

Poor cash flow management

A recent study done by US Bank found that 82% of small businesses (<100 employees) fail, due to poor cash flow management. Yet another reason why business leaders need to learn more about cash flow.

What is cash flow in a business?

Watch Barend Cronjé, CoLAB CEO, talk about cash flow:

There are many definitions of cash flow.

Firstly, a business owner will define it as “the general availability of cash when needed”.

Secondly, a banker defines cash flow as “the ratio that describes management competence”.

Thirdly, “the change in cash and debt balance over a period” is a typical book definition.

Importantly, Verne Harnish defines cash as “the oxygen of the business”.

However, if you as the business leader don’t understand the basic numbers of your business, those who do will always have an advantage over you.

Two uses for cash flow in a business

There are only two uses for cash flow in a business:

  1. To invest in growth, or
  2. To fund poor management practices.

Enough cash flow to fund your business growth?

Business growth is at the front of every executive’s mind. However, as a business owner or leader, you need to consider these questions:

  • Do you have enough cash to sleep well?
  • Are you generating enough cash to fund your growth?
  • Do you actively track your cash flow – at least monthly?

If you answered no to any of these questions, you have some work to do as a business leader, or face the risk of joining the statistics.

Helping business leaders to understand cash flow

CoLAB will be publishing a 4-part series on cash flow management. We will share our #bestpractical content on understanding your key numbers and how to improve your cash flow.

We will also introduce you to a tool that focuses on the seven financial drivers to improve your cash and returns by 45% or more.  We’ve recently helped a client improve their cash flow by 81%, from an already healthy position. This was a result of the leadership team learning and understanding more about cash flow.

Need to understand more about cash flow?

If you are

  • the leader in a growing business,
  • been in business for more than 5 years,
  • serious about scaling your business to the next level, and
  • willing do what it takes to achieve your goals,

then you need to follow our 4-part series on cash flow management.

However, if you need a more urgent discussion around your situation, click this link to set up a quick 20-minute chat about your cash flow needs.

CoLAB can help you solve your cash flow issues, so you can BREATHE.

At CoLAB we are easy to deal with, very approachable, and we love what we do!

 

Read these popular CoLAB articles on cash flow:

Ways to improve cash flow 

The cash conversion cycle 

Issues with the people structure in your business? Then this offering is for you:

Refresh your people structure 

 

The CoLAB group serves its’ clients through 3 specialist practices:

Profit Improvement 

Talent Placements 

Project Delivery 

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