Reason #1. Poor Cash Management
No matter how profitable your business may be or how great the products and services you provide, it will not survive if you’re unable to properly manage its cash flow. If you don't have enough money to carry you through the first six months or so before the business starts making money, your chances of survival are slim. Studies show that more than 80% of start-ups fail due to poor cash management.
As a Small Business Consultant, I’m blown away by the number of prospects who are industry experts, great at generating sales, but terrible when it comes to managing money. Not to mention those using the business as their personal ATM to fund extravagant lifestyles. Cash is the life blood of a business and its management is the first line of defense against financial suicide.
Nobody starts a business intending to fail. But failing to cap spending or managing costs is like shooting your business in the foot, so to speak. Incorporating cash management best practices can help your business get back on the road to success.
Cash Management Best Practices include:
Establish an efficient Accounts Receivable Collection Process
Take advantage of Payment Terms
Keep Operating expense under control
Create a Plan for Excess Cash
Remember: Winning in business is not just about how much you earn but rather, how much you get to keep. Stay tuned next week for Reason #2
BUSINESS $ENSE: The Idiot's guide to growing a sustainable business