In Part 1 we looked at the scary, but meaningless, statistics around cashflow and business failure and answered the question how much cash is enough cash. In Part 2 we are going to take a more detailed look at the specific actions that result in cashflow shortfalls with businesses and what actions you can take to avoid becoming part of this atrocious statistic.

Over the years I have been asked to talk or write about cashflow. I have found it incredibly hard to do so and do my best to avoid it. Until recently I found the concept of cashflow rather abstract (a bit of a worry seeing as I'm an accountant). It sounds simple enough. Money in versus money out, but what does that really mean?

Leaving your job to start your own business can be scary when you no longer have the security of a regular income to support household expenses. Making sales, turning a profit and getting cash in the door fast are now your top priorities. It may come as a shock to those just starting out in business that you don’t start earning the same income from day one that you did when employed. It does take time to build a business. There’s a reason only 20% of businesses make it to 5 years – the owner doesn’t have enough cash left over for them to live off! You need to go from start-up to revved up fast, if being in business long term is your goal. I started my own business a few years ago and have learnt a few things along the way.

Our case study about how Adrienne used the principles of Mike Michalowicz’s book, Profit First, really showed how cashflow is king. By following the recommendations of the book, Adrienne transformed her cashflow and made it through COVID. If you are wondering how to improve yours and not quite sure you have the time to read the book, here is my review of Profit First. The essence of the book comes down to 4 profit-management principles…