“The best time to plant a tree was 20 years ago. The second best time is now,” goes a famous Chinese proverb.
Imagine you are driving on the motorway and there are three lanes.
When driving along a three-lane motorway, rule 264 of the Highway Code states: “You should always drive in the left-hand lane when the road ahead is clear. If you are overtaking a number of slow-moving vehicles, you should return to the left-hand lane as soon as you are safely past.” [Source: RAC]
If you know about lane discipline or the Highway Code then you’ll have no problem driving on the motorway and reaching your destination safely.
But without it you’ll take longer to reach where you want to go, and may break the rules and pay a penalty.
It’s the same in business. To keep moving forward at an optimum speed you need to know the rules and the right discipline.
Understanding cash flow management and the math that goes with it is the part of this discipline.
When you know the rules of this game, you’ll know the optimum speed of business growth, and the right level of cash investments?
Without this understanding, your business’s long term, survival may be at risk.
I have seen a friend’s £4m e-commerce business go bust because his business could not pay the bank loan on time. It took him five years to build the business, and it only took six months for everything to fall apart.
What if there was a skill that could save your business from the brink of collapse? Warren Buffet spoke about one such skill when he said, “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”
If you follow this rule, then you are presented with opportunities to accelerate your business growth. By delaying your learning about cash flow you may be foregoing these opportunities.
Think of any sport or a universal experience like driving a car. First, you learn to control the vehicle, so that you are in the best position to accelerate.
Similarly to control your business, you first develop your cash management skills and then you take up the opportunities to grow and accelerate it.
Without a cash flow forecast statement, you will not have clarity in your cash position. Without clarity, you will not have the confidence to make financial decisions. And without confidence, you will not have control of your business.
So don’t delay and start understanding cash flow today.