Positive cash flow is king

It’s not all about profit. Positive cash flow is king.  There are many businesses that have failed which have been profitable and even had a great good or service.  Yet that doesn’t translate to survival if cash flow is negative.

Various studies of small business failure all list poor or inadequate cash flow as the number reason for small business failure – and do so by a long way with most surveys attributing this as the main reason in anywhere from 70% to 90% of cases.

One should never go into business without understanding such things as:-

  • How big is the market.
  • Who is the competition.
  • What are the direct costs of producing the good or service.
  • What are the other costs of running the business.
  • If you need staff, where are you going to find them and how are you going to train them.
  • How much cash do you need to get started and then grow – and how long before you can repay yourself.
  • If you need bank finance, what are the measures by which they are going to approve your loan application both initially and on-going.

This is where planning and budgeting are so important. You will be forced to address all these issues and more.  You will need to assess priorities to various tasks and needs.  Planning and budgeting provide clarity and removes foggy uncertainty and fear.

Too many small businesses either fail to undertake any of these tasks, or may be at best scratch out some kind of profit and loss statement. Sadly most people plan their holidays better than the very thing that will generate income, support their family and pre-occupy most of their waking hours. We have planning templates as well as specialised software which can generate not only a P&L but a cash flow, balance sheet and a funds statement (showing where money will come from and where it will go).  We can then play with various high and low forecasts.  We can then go and show you the measures by which a bank may finance you and assess you in their annual reviews (bankers love our reports).  This includes giving you a dashboard to regularly check your progress and performance.

We welcome the opportunity to meet with you in a free one hour meeting to understand your business and to explain they ways we can help.

At MRS, we will spend today planning for your success tomorrow.

At MRS, we will spend today planning for your success.