Unable to pay the bills, many companies with high revenue had to close their doors. Why? Because cash and revenue are not the same thing. Cash flow, critical to keeping the company afloat, is knowledge of how much money a company has every day or every week to pay necessary bills. There is never too little cash to keep track of. Business leaders who believe they’ll start doing it when they have some are in denial of what cash flow management is all about.
Nothing is more important than recording how fast the cash is coming in (or not) and how fast it’s leaving the business. In fact, understanding cash flow helps leaders make better decisions up to six months in advance. The CEO can leverage even a small amount of cash, and sometimes, in the early stages of any business, that’s all there is! Start analyzing your cash flow by asking the following:
- Does the company have a profit plan?
- Does the company monitor cash flow?
- Does the company have an operational plan?
- Does the company have a marketing plan?
- Does the CEO pay attention to financials?
Why This Challenge Must Be Resolved
The value in controlling cash flow is that you deal with reality, not wishes. By doing it consistently, there will be no surprises and the leader can focus on the one activity he/she has to be focused on — following the money!
Cash flow management should always be a part of the leader’s job, even when revenues are strong. There may be an accountant or a bookkeeper who runs it for the business, but it’s the CEO’s responsibility to know how much cash the company has.
Need help with this topic or leadership coaching? Contact Mission Critical Teams.