During the 1992 presidential election, there was a sign that was reportedly hung by James Carville, Bill Clinton’s campaign manager in their Little Rock Office that simple stated “It’s the economy, stupid.” This was a reminder to everyone that worked there that the only thing that the national race was about was the economy.
That year, I started my third business after failing in two others. This time, I made my own sign and tacked it up in my office. It read, “It’s cash flow, stupid.” It became my daily reminder and mantra. Starting out in my first business in 1980′s, I thought that the only thing that mattered was to sell my product to whoever would buy it. I reasoned that if you make sales, you eventually make money.
This worked great until customers didn’t pay me on time or at the same rate as my business expenses grew. Unfortunately, even if my customers did not pay their bills when they were due, my employees and vendors still wanted to get paid on time. What I realized is that sales do not pay bills, cash does.
Collecting the cash from sales means everything. It is the gasoline that makes your business engine work. Without cash, your business literally suffocates. Most businesses fail because they run out of cash leaked through losses or other poor management practices.
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