Thursday, August 7, 2014

Beyond cash flow

     Free daily tips, information and advice for people in small business
     from personal business experience--been there, done that.

     Small businesses face big time cash flow problems. Bills pile up and there's never enough cash to deal with it.

     You are your own backup of last resort. A certain amount of prudent juggling can see you through these times. But sometimes that's not enough.

     Example: A small business I know solved the ups and downs of cash flow by putting in place a revolving line of credit with a local bank. It was for $250,000. When incoming cash did not meet the outgoing cash requirements to pay bills and meet payroll, the owner hit the revolving credit line for a cash infusion. It was a short term loan. When the receivables came in, the loan was paid off. Problem solved. Then, the unthinkable happened. Bank policy changed. The owner was notified that the bank would not be offering revolving credit accounts under a million dollars--effective in 30 days. The owner's credit line would be disappearing in short order. He scrambled to find another bank that would meet his requirements. 

     In small business, you must always think ahead, preparing for any eventuality. The ocean on which you are sailing is always changing--the waves can wash over your ship and storms can sink you to the bottom.

     Example: An even smaller business handled the ups and downs of cash flow in a different manner. Due to its small size, this business was not eligible for a revolving line of credit. The owner juggled outgoing payments for materials and supplies, balancing bills with cash to pay them. When a shortfall still existed, he held his own paycheck until the bank account could handle it. He always wrote his paycheck, but he threw it into the desk drawer awaiting the day when it would clear the bank account. Sometimes, this took weeks. 

     Be prepared for all the things the economy and the marketplace throw at you. The world doesn't end when the cash flow suddenly dips or stops flowing. 

     You do whatever is necessary to get through the storm. When all is said and done, you know that the sun will come up tomorrow.

     Your ingenuity is what got you into business, and your ingenuity will keep you going. You build on what works, and you discard what does not work. I've read about cash flow in books, and I've lived the ups and downs of cash flow in my own businesses. As a matter of fact, I was the owner of the two small businesses in the examples above. 

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