Cash

5th October 2017

When Cash is King

No one can prepare us for the reality check that comes the first time, as a business owner, we need to sign the cheque to make the payroll. Nothing can prepare us for the reality that bites at that moment, the realisation that if there isn’t enough cash available that people are not going to get paid and all that will ensue. That moment of truth is a defining moment and I don’t believe that anyone who has not been in that position can ever fully realise what it is like.

Those who would take the entrepreneurial pathway can be all too familiar with the challenge and having experienced it once, it never really goes away. I am never too sure how much the acquisition of money motivates anyone but I am absolutely certain that money is the one thing that allows businesses to continue being businesses. The same thing is true of charities and indeed the public sector. So irrespective of our motives and aspirations our ability, as entrepreneurs, to manage money generally and to generate cash specifically is non-negotiable.

Warren Buffet is quoted as having said, “If you don’t understand the language of business, finance and accountancy, then you can’t play the game of business”. To play the game at all we need to understand the basic language, which constantly reiterates that cash is king. We don’t need to have advanced knowledge of higher financial principles but we do need to know the fundamentals and we do need to have the basic measurements and metrics constantly available. No matter what our business, no matter what our creative flair, no matter what our business model, we need to understand the basic rules of the game.

We should know the difference between cash, cash flow and profit and the links between them. We should have and pay attention to the correct metrics, the ideal dashboard so that we can get on and run our business successfully.

It can be difficult to find resources that will explain the basics without trying to turn you into an accountant. I would recommend the book “Finance on a Beermat” as a starting point or come along to my next free seminar where I will be talking about cash, cash flow and profit as well as the five ways to grow profit in any business. After all we must never forget why cash is king.