Why Cash Flow is Like High Blood Pressure

Roughly 1 in 4 adults have high blood pressure.  Most people with highblood pressure remain undiagnosed and feel normal.  However, it causes damage to vital organs and can have serious consequences. If you don’t check your blood pressure regularly, you remain vulnerable to the silent killer.

dollars-426026_640A larger percentage of small and mid-sized businesses face an analogous silent killer, only in the world of financial management the threat to a company takes the form of Cash Flow. The bright news for business owners is managing cash flow does offer early symptoms and warning signs, and is a solvable problem. Unfortunately too often it is left unmanaged, with fatal consequences for the business.

1 – Identify the Symptoms
Slaying the silent killer of cash flow is a fundamental prerequisite for sustainable growth and success in small to mid-sized  businesses. The symptoms that arise from cash flow problems are typically reflected in the financial statements of a business but often get little to zero attention.

A common theme in this lack of attention is found in entrepreneurs’, not schooled in financial management skills, where Sales (Revenue) is considered as synonymous with Cash Flow, or Profits equal cash Flow. This murky world of misunderstanding is where manysmall businesses struggle.

2 –  Understand the Issue
The confusion between sales and cashflow generally stems from the fact that both are positive things.  Strong businesses have both good sales and strong cashflow.  The difference between the two is that sales are a promise of future cashflow, however if a business does not collect on those sales (eg. a customer pays late or not at all) then the sale can actually into a negative cashflow situation.

3 – Move Forward, Stronger

Do a regular Cash Flow checkup to maintain the health and vitality of your business.   It is best to check on a weekly basis to make sure that your customers are paying their invoices on time, and to make sure that you will have enough cash in the bank when your bills or payroll need to get paid.  For automated help managing cashflow, check out our app, Mentio, that does it for you!

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Gary Boddington

Gary Boddington

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Gary is an advisor at Mentio, bringing financial intelligence to small businesses. He loves the startup world and helping entrepreneurs level up their businesses.


 

 

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Gary BoddingtonWhy Cash Flow is Like High Blood Pressure