“Cash is King”
Cash is king and the life blood of every business. Maintaining adequate levels of cash flow is essential to fund the ongoing operation of your business. Meeting fixed costs such as salaries and utility costs can be the most challenging.
The number one reason for business failure is under-capitalization – running out of cash. As most business owners know, profits do not equal cash flow. It takes cash to invest in infrastructure, lay the foundation for future growth, and build capacity.
At Consultas, we help businesses all over the UK to secure finance to meet daily operational costs.
THREE WAYS THAT YOUR BUSINESS CAN RUN OUT OF CASH
1. No cash flow projections or cash budget – While many businesses plan for revenues and profits, they do not do an adequate job assuring sufficient cash flow. A cash flow statement completes the income statement and balance sheet as the three essential financial management tools for a business.
Every business should have a comprehensive cash flow budget that defines how much cash will be available from financing sources and operations, how much will be needed for operations, and how much will be required for non income statement activities such as expansion, infrastructure, investments in inventory, and investments in longer term assets.
The business should also understand the sources and uses of cash, and levers to improve cash flow (e.g. decreasing days receivables, increasing payables, improving financing sources and terms, and eliminating unnecessary or unprofitable cash outlays).
At the same time, the business coach should challenge these assumptions, because most businesses tend to severely underestimate how much cash flows out of the business, and how long it takes to recover that cash.
2. Rapid growth – Rapidly growing businesses are much more likely than slower growth businesses to run out of cash. Cash flow needs increase with growth rates. That’s because the business needs to hire new people, increase marketing, invest in production capacity, order more inventory, and make other expenditures to keep up with demand. The smart business owner will slow growth if required in order to balance capacity, cash flow, and demand.
3. Early stage development – Early stage companies also are more likely to run out of cash. They often receive only partial funding for investors who will provide more cash pending certain milestones.
At the same time, most entrepreneurs underestimate the time to cash flow and cash flow required in the business by as much as 100-200% (time and time again!). Owners of early stage companies need to be skilled at finding sources of cash and in projecting cash flow accurately.
We also source financing from a number of channels for small and large capital investments. To do this, we work closely with all of the entities below to secure sufficient funding for your business.
If you feel we could assist your business, please call:
Niall Kavanagh – Director | +353 83 427 4881
Connell Porter – Director | +353 83 480 9229
John Connelly – Director | +353 87 613 9851
