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This podcast is the sixth in the series of Top Ten Ways to Build Better Business Abs. In this podcast we discuss the importance of cash flow.
Cash is oxygen for your business. It what keeps your organization breathing. Many businesses fail because they lack adequate capital, have limited or no lines of credit or have inadequate cash management. This affects businesses of all sizes and at all stages of their business life cycle. Many businesses are seasonal and absolutely must have a disciplined cash management plan to survive the slower times of the year.
In general cash flow issues are the result of other core problems in your business For example, selling a product or service at a price that is too low or if your cost of goods (COG) is too high or is rising. In either case, raising your prices would be one manner to increase cash flow. Cutting expenses by increased efficiency or better purchasing of raw materials or inventory is another important manner to grow the cash of your operations.
Many businesses feel it is necessary to act as a 'bank' to their customers by extended generous credit terms. These payment terms can put your business in serious jeopardy if not handled properly and with strict guidelines.
Creating a disciplined cash management system is a core business function. Your system should address how and when you get paid as well as where and how you access your cash. Getting a good handle on your cash flow will allow you to understand the true cost of your product or service.
It's good to talk.