Beware the Cash Crunch! – part 1
Businesses, especially new companies or old companies making forays into new enterprises, run the risk of sinking funds into the wrong end of the operation and then not having enough cash when it’s desperately needed. Adequately reserving for growth, especially during the early days of the business, is critical. It also helps to recognize the areas where cash can disappear without a trace.
No matter how prepared the business may think it is, unless it is operating in an area in which it has had years of experience—in terms of both the product and the market—the chances of anticipating the majority of risks that could come its way are remote. If managers hope for the best but reserve for the worst, they will find themselves in a better position when those cash-draining contingencies do arrive.
Tags: cash crunch, cash flow, productivity, profit, sales