Thursday, July 30th, 2009
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
Posted in accounting, banking, credit cards, financial risks | Comments Off
Thursday, July 30th, 2009
That’s good advice for any department head, no matter what the level of financial involvement. R & D managers might find need for additional research into other avenues affecting market or product, making additional expenditures necessary. Sales managers might suddenly be directed to fire several staff, incurring the cost of training and reduced productivity as part of these unanticipated changes. The product developer may find a need for more complex and expensive equipment, may see a sudden increase in the cost of raw materials, or may suddenly face new legislative restrictions on production.
If either of these individuals or companies haven’t made plans to protect their enterprises and reserve against such risks, then the demand for their product won’t really matter, because they won’t have the resources to meet that demand.
Tags: cash flow, productivity, profit, sales
Posted in accounting, customer demand, developers, payments | Comments Off
Wednesday, July 29th, 2009
First and foremost, cash flow is not the profit you make from sales or the difference between expenses and revenue. Cash flow is the flow of money in and out of a business. That’s all.
Cash is accounted for as an asset, and there are a lot more challenges related to cash flow than accounting provides. Fortunately, there are also solutions, or at least strategies, to maximize the inflow and minimize the outflow.
Keep in mind Maxim 1 of modern business:
Everything a business does takes longer and costs more than managers could possibly anticipate even in their most liberal scenario. Adjust your thinking accordingly.
What is cmhl For the sake of this discussion, consider it the company’s most valuable asset, the one you need to protect with all your might.
Tags: cash flow, profit, sales
Posted in accounting, global market, loans, online bank, payments | Comments Off
Wednesday, July 29th, 2009
At one point product sales may be brisk and revenues over cost of goods sizable. There is no problem there. Then suddenly demand will pick up and costs will escalate—a by-product of needing more of everything to increase production and keep up with increased demand. Just about that time, a major creditor will run into a snag and will have to slow up payments.
Suddenly the company is caught in a cash crunch—more money is going out than is coming in when it’s needed. Then the company doesn’t have the capital it needs to help meet customer demand. Despite having a highly profitable profile on paper, the company isn’t receiving funds in the timely manner that it needs to pay its bills. Think of it like this: You just ordered a new car because you won $25,000 in the lottery. The dealer wants the money, but the lottery officials just told you that they can’t send the check for three months. Uh-oh.
Cash flow problems happen to all of us from time to time. If you plan sufficiently, you may avoid many of those rapids, but not all.
Tags: bank payment, cash flow, floats, management
Posted in customer demand, money spending, online bank, payments, real estate | Comments Off