Bullet Proof Your Business

Many directors monitor revenue and profit, and so they should. What should be talked about more is cash flow, this is the way to bullet proof any company. Three names you will know understood this and it provided the success they achieved. They are Steve Jobs from Apple, Jeff Bezos from Amazon and Warren Buffett from Berkshire.

They all understood that a focus on cash flow was the key to success. Not just because it ensured the business was always solvent, but because it created extra cash that they reinvested in their company to grow even larger, and quickly. Strong cash flow provides certainty financially and avoids the domino effect of delayed payment of creditors and potential insolvency.

I have seen companies with huge amounts of old inventory, aged debtors at 120 days still owing them money, and little control over expenditures. If directors focus on always maintaining liquidity it allows time to seek better revenue and profit and eliminates ambiguity. This may mean such things as reducing inventory, speeding up customer payment times, negotiating longer supplier payment terms and having flexible banking facilities. It certainly means reviewing a cash flow forecast out to 6 months from now to see a likely closing bank balance at the end of each month.

If you are looking for further investors for the company or a better deal with your bank, then talk free cash flow. It is not only earnings or revenue, but free cash flow is also what they look at. With strong cash flows you can look for opportunities to invest more back into the company or start to grow by acquiring other businesses. You are then deploying and multiplying cash flow.

If you want to bullet proof your company, have an in-depth discussion about how to improve your cash flow.