If you can’t explain it simply, you don’t understand it well enough. ~Albert Einstein
Being a successful business owner takes a lot of hard work, determination, talent, and the ability to learn new things that will contribute to making quality decisions. The learning of new things is made easier when you break it down into its most simplistic terms, so there is no mistaking that you have a deep understanding. In our experience, business owners know far too little about the cash flow and profit side of their business. In some instances, they have nothing set up to minimize the gap between what they don’t know and what they need to know. And in almost all situations, there is an insecurity in asking for help, asking questions, and bringing in experts that can assist in tracking your cash flow and explaining it all to you. Here is my attempt to change that.
Team Parabilis has proudly joined forces to shed light on this important topic. Our expert resource is David Safeer, a world-renowned cash flow expert and Founder and CEO of Cash is Clear Learning Systems. We’ve asked him a few questions to shed some light for you:
What are the biggest challenges small businesses face?
- 80% of small businesses that go out of business report back that cash was the key factor in going out of business. It is the biggest factor that struggling small businesses face. The causes of cash flow problems vary widely. It could be: sales are too high because they are growing too fast, or possibly the business is shrinking, or they are doing great with sales but clients don’t pay on time. Every company is unique, but what it boils down to is cash flow.
What are the most common myths about Cash Flow management?
The most common myths are that the “common wisdom solutions” hold the answers. For example:
- “Sell more to alleviate cash flow problems!” It doesn’t always work. You can dig a bigger hole if you are not prepared for the additional costs that come from additional selling. Oftentimes, you incur the costs well before you get the cash in the bank from the sales.
- “Always get paid faster and pay as late as possible.” It’s just not always the best way to go. Sometimes there’s a discount for paying early, or offering longer terms for customers could bring in additional cash.
- “Revenue is the big driver for managing cash flow.” It just isn’t. It’s profit margins, it’s expenses, and it’s timing. Those are the things that drive cash flow.
- “Your accountant can help you with this.” Accountants are trained to look backward in everything they do, meaning they look at the past, they record the past, and they document the numbers exactly. Cash flow management is forward-looking, it is not particularly accurate or exact; it’s a best guess try with the information that you have available, and it’s not always documented. So a lot of accountants have a hard time making the transition from accounting to cash flow management.
The biggest asset you have is access to new information that gives you the ability to make better decisions for your business. If controlling your cash flow isn’t part of your current business plan, I encourage you to join us on January 31, 2023, and get a glimpse at what you are missing and the damage this could be doing to your ability to succeed at the level you desire! Click the link below and be among a select group that will be able to speak directly with David Safeer and learn of some tactics on how to create visibility and control of your cash flow!