Sales is Vanity, Profit is Sanity – But Cash Flow is Reality

Sales is vanity, profit is sanity but cash flow is reality – Not sure who said this first but it is so true

When you first start your small business, you will likely run on the adrenaline of knowing you’ve created something for yourself. You will also feel elated once you’ve made your first sale, signed your first deal, sealed new clients or hired your first employees.

It’s all very new and exciting.

To succeed you must manage your cash flow. Start off by developing a 12-month forecast that you update on a regular basis. Your forecast will probably be way out in the beginning but as you gain more experience in your business, you will see your forecast getting more accurate

Tips and advice:

– Input your actual sales and expense figures into your spreadsheet at the end of each month so that you can make adjustments and compare your actual numbers to your projections.

– Remember showing a negative cash flow is not always a bad thing, as long as you know the reason why.

– When you start a small business, it will probably take some time for you to reach a positive cash flow.

– Be aware a business can make profit, but still go bankrupt if it has a cash flow problem.

– Use your cash flow forecast to set budgets for your staff so that they become aware of costs and try to control them.

– Get some advice from your small business banker on how to manage cash flow.

– If numbers aren’t your strength sit down with an accountant that works with small businesses and together develop your forecasts.

– Monitor your bank statement daily.

– If you can afford to give your clients extended terms, don’t do it.

– Monitor your receivables and inventory regularly.

Manage your cash flow and build a successful business. YOU CAN DO IT

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One response to “Sales is Vanity, Profit is Sanity – But Cash Flow is Reality

  1. Cash flow is King! However, in these difficult times, getting clients and sales is insane.

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