Philip Campbell's Blog

The Survey Results Are In: How Do You Manage Your Cash Flow?

 

Here are the results of the 2-question survey from last week about cash flow.

 

Question 1: Do you look at your Cash Flow Statement every month?

Question 2: Can you answer this question in a 2-minute conversation – "What happened to my cash last month"?

Observation #1

Two things of note in the results.

First, 82% of the responders look at their Cash Flow Statement every month. One reason that number is so high is many of those who follow my blog are financially oriented people – what I like to call serious-minded entrepreneurs. And many readers/followers are advisors to entrepreneurs, business owners, and CEOs.

They know and respect the financial side of their business.

Think about it. Reading my blog every week would be painful for a person who didn't care much about financial performance in business! I'd drive them crazy with my focus on profitability and cash flow. J

Observation #2

Second, almost the same percentage of those who look at their Cash Flow Statement say they can explain what happened to their cash last month in a 2-minute conversation.

I like the 2-minute conversation test because it means you have a good understanding of the big picture view of what happened financially last month. It's a great test of whether you have the financial side of your business under control.

It's no surprise that if you pay attention to cash flow (look at it every month) then you are more likely to understand what's going on with the cash (at the financial statement level).

And you will make better business decisions when you fully understand the financial and cash flow implications of your decisions.

If you have not seen it yet, check out the 2-question survey and see how you compare. It's super-fast.

 

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Knowledge vs Action: How Do You Manage Your Cash Flow?

We all know that cash (and cash flow) is an important asset in business.

Business isn't too much fun when cash is in short supply. And things get easier when there is plenty of cash flowing into the company.

We have the knowledge. So how about the actions we take based on that knowledge?

Please select your answer to the two questions in this super-fast survey.

 

Create your own user feedback survey

NOTE: If the two-question survey is not shown above, please click here (it only takes a couple seconds).

From a management perspective, cash is one of those assets that requires "Adult Financial Supervision". Especially if you are serious about growing your company.

Remember, it's all about the cash! 

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Growth Sucks Cash

Here is another great quote from Verne Harnish's new book, Scaling Up: How a Few Companies Make It… and Why the Rest Don't:

"Growth sucks cash. This is the first law of entrepreneurial gravity. And nothing ages a CEO and his or her team faster than being short of cash.

Yet many growth company leaders pay more attention to revenue and profit than they do to cash when it comes to structuring deals with suppliers, customers, employees (think bonus plans), or investors/banks.

And when they receive their monthly financial statements, the cash flow statement is either non-existent or ignored."

He is absolutely right that growth is usually a net user of cash. And he is right that "the cash flow statement is either non-existent or ignored".

The reason the cash flow statement is missing or ignored by most business owners is:

• It was created by accountants… for accountants
• No one understands it (including many accountants)
• It's not intuitive

So what's a business owner to do if they want to better understand and manage their cash flow?

What do you do if you want to make smart decisions about cash as you grow your company?

Keep it Simple

By keep it simple, I mean the work to understand your cash flow each month should take 10 minutes or less. And after that 10 minutes, you should be able to explain what happened to the cash to your partner or a lender/banker in a 2-minute conversation.

I do that with the Cash flow Focus Report.

The secret to understanding cash flow is to focus each month on the three largest drivers of cash. Not the 25 or so different drivers on the traditional cash flow statement. Just the three largest drivers.

You can read more about the Cash Flow Focus Report in this blog post.

Or you can learn how to use the Cash Flow Focus Report in my online course Understanding Your Cash Flow – In Less Than 10 Minutes.

 

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It’s Time to Grow

If you want to grow your company you should check out Verne Harnish's great new book, Scaling Up: How a Few Companies Make It… and Why the Rest Don't.

I love this quote where he talks about the financial side of business:

"In managing Cash, don't run out of it. This means paying as much attention to how every decision affects cash flow as you would to revenue and profitability."

He starts the Introduction to the book with a fantastic quote from R. Buckminster Fuller:

"If you want to teach people a new way of thinking, don't bother trying to teach them. Instead, give them a tool, the use of which will lead to new ways of thinking."

I firmly believe in the power of tools. So here are a couple of my tools I recommend you take a look at.

1. The Cash Flow Focus Report. This is a super-fast and surprisingly powerful tool to help you better understand and manage cash flow. It focuses you instantly on the three biggest drivers of cash each month.
2. The Peace of Mind Schedule. This is the tool I teach in my book Never Run Out of Cash: The 10 Cash Flow Rules You Can't Afford to Ignore. It provides an insightful view of your monthly cash flow and provides visibility into the key cash question: "What do you expect your cash balance to be six months from now?"

Now is the time to decide that growing, making money and creating wealth is a high priority. J

 

Click here to get my blog posts delivered right to your email inbox. I publish one new post each week. (Privacy Policy: I will NEVER rent or sell your email address and you may remove yourself from this list at any time you choose.)