Most people who have never had businesses of their own think that owning a business automatically means you have dough.
"Sure, you can get the check because you can just write if off." Seriously?
Do these people understand that having a business is the most delicate balancing act of cash management that anyone can probably undertake? The cash we all have is as precious as air itself and writing things off does not mean free money.
Related: Ignore that Accounting Problem -- At Your Own Risk
When I was in school getting my MBA professors would say, "cash is king" (as religiously as I tell my children to wash their hands) consistently and with purpose.
I was paying attention at school but never really understood the seriousness of this message until cash in my first business became more than king. It became air. Without it we were going to die.
I remember going to my accountant and saying, "This year end looks awesome! We made some good money, eh? But, where is all the cash?"
She replied, "Well, those financial statements show what we did but there is no cash, and actually we need $600,000 by Friday."
(Insert your own unmentionable phrase here.)
I knew how to read financial statements and my MBA brain had become too caught up in what they said to be paying attention to the cash. And truthfully I knew the cash was running out and I was kind of avoiding asking any questions because I did not want to address this. Ignorance is bliss or so they say. That's until ignorance takes the shape of a six-figure number and then the ignorance made me sick to my stomach and run for the closest wastepaper basket.
So, here is what I know about cash flow from having learned things the hard way:
Related: My Biggest Mistake: Not Closely Examining the Numbers
1. Always, always, always know how much cash you have in your account.
2. Take that cash-in-your-account number and subtract all the payments that you have placed in the mail. That represents the cash or checks inside envelopes traveling to their rightful owners by way of a lovely postman or -mistress.
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