Importance of Cash Flow
Learning how to better manage your cash flow can make the difference between your success or failure in business. The essence of successful cash flow management is regulating the money flowing in and out of your business.
It’s critical that you manage the money coming in to your business to ensure you have enough on-hand to cover your spending as well as unexpected expenses.
If you have ever found yourself holding off on paying a bill until a check clears your bank account, you’re familiar with the basic premise of cash flow.
Cash Flow is King
Understanding the dynamics of cash flow will make or break your business. The lack of Positive Cash Flow is the #1 cause of business failure. Let me make sure you understand precisely what I mean by the term “Positive Cash Flow”. It doesn’t mean making a profit. It means that the income that comes in this month will be more than your expenses that you pay out. Well… that sounds like profit, but it isn’t.
For example, if you borrow money from your “Visa” card to start your business, and the money invested in your business produces even one penny over and above what you must pay to “visa” each month, then that is a positive cash flow.
Folks frequently begin a business without enough money or emotional commitment to hang in there for a minimum of a year with NEGATIVE CASH FLOW. They also make the common mistake of expecting to earn money as if they were being paid by their employer. Starting a new business does not work that way. You may have to develop your business for months before producing your first dime of income and even more months before your income exceeds your monthly expenses. However, the rewards far outweigh the costs.
What’s the difference between an employee and a business owner?
Why do some investors make money with little risk while most investors just break even?
Why do most employees go from job to job while others quit their jobs and go on to build business empires?
Rich Dad’s Guide to Financial Freedom
THE CASHFLOW QUADRANT answers the above questions and guides you in finding your own path to financial freedom in a world of ever increasing financial change.