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Friends,
This vitamin is a warning, a warning to us all that during challenging economic circumstances we need to focus on what keeps the doors open, cashflow. As the owner take control of this aspect of your business, delegate yes but never never abdicate.
Until next time live with passion, excitement and expectation . It will change you life!
Regards
Tony Gattari |
Don’t Abdicate Your Responsibility
Say if you handed your bank account details to a chronic gambler; how would you sleep at night? How long would it take before you had no money left? I guess that not everyone would be that silly and give their bank account details to a chronic gambler, yet many business owners hand all of their business’ financials to a book keeper, accountant, or an internal finance employee, without looking at the numbers until it as was all too late.
It is because looking at numbers is not fun, and I’ll be totally honest, it is downright boring (well not for accountants). Most men have to shave everyday, and for the majority of us, it is not something that we really enjoy doing, but for the sake of personal hygiene and professionalism we just do it. I am not suggesting that all business owners who have abdicated their responsibilities, take back all of the accounts and banking duties. You must move yourself into the position of a ‘finance manager’; a person who does not process the finance data, but manages them by reviewing the key financial statements of the business such as cash flow statements, profit and loss statements, and balance sheets on a consistent basis.
Why Cash Flow Before Operational Systems
Many business owners focus on the operational needs of the business ahead of creating a robust system for protecting cash flow. In many businesses inefficiencies and shrinkage does cause a loss in profit, but not ensuring that you have money in the bank is business suicide.
How much cash is in your bank account at the moment? Are you able to pay next months rent? What about your employees pay checks? How long has it been since you have paid yourself? If you are currently asking yourself these questions day after day (and not sleeping in the process), you should apply the principle you will learn from this chapter, prior to investing in operational system requirements.
Also, operational systems cost money to implement. We do not argue that they are not critical to business success, but in order of importance, it ranks below having cash in the bank. You also need cash to be able to support the future growth of your business; it is not just how you cover you bills in the present, but how you fund your business to make the vision become reality.
Don’t Drive too Fast too Soon
Hey Tony, why don’t I just focus on driving more sales in the front door? Doesn’t sales fix everything?
In my experience many advisors teach business owners how to rapidly accelerate sales and profitability, which obviously gets businesses excited. However, if you don’t have the fundamentals in place, you can actually send your business broke, whilst experiencing massive increases to the top line.
Increasing sales is just outright fun! So is driving a Ferrari! But you can’t drive one of those every day, if you don’t have the means to pay back the money you borrowed for it. What many business owners fail to understand is that there are 5 areas which make up cash flow. That is why when they drive the top line of the business hard, if they are not collecting the accounts quickly enough, or are not turning over the stock fast enough, then all that revenue will dry up quickly.
Your Activation exercise
How often do you read your cash flow statements?
ACTIVATION 1
- Yearly
- Monthly
- Weekly
- Daily
- What are you talking about?
If you are not looking at you cash flow on a minimum of weekly or monthly basis, you are on the road to business suicide. The main reason businesses go broke, is because they have run out of cash. |
