There is much misunderstanding of the definition of cashflow and its relationship as to the actual health of a business. Cashflow is essential for any business, it is the lifeblood of your business but unless there is an understanding of both the myths and facts of cashflow, your business will bleed out.
Common statements and myths regarding cashflow:
- If I have more sales, I will have more cashflow
- If my business is profitable, I will have adequate cashflow
- If I have cash in the bank, I will have good cashflow
- Managing cashflow is someone else’s job. (bookkeeper, CFO, accountant)
- If I need more cash, I will just get another loan to float the business for the short term.
- People owe me money so my cashflow will be fine eventually.
- My business lives from week to week like my employees and my business is small and it is just the way small business works.
- I have a budget so my cashflow will be fine if I follow it.
The key is figuring out your “free cashflow” and learning how to manage the cashflow well so your business can be healthy.
