Cash Will Always Be King

The thought of working with figures and managing your cashflow is probably not the thing that gets a social entrepreneur out of bed in the morning!

However, having a grip on your numbers is likely to keep your enterprise in business. Dun & Bradstreet state that 90% of company failures result from cash issues and, having recently done a lot of investment readiness work with charities and social enterprises, I’ve realised that the “Cash is King” message is still not sinking in or being acted upon.

A crucial message to get across first of all is that the money is not the sole responsibility of the Finance Director and/or treasurer. It starts from the top and that means the CEO being able to understand and manage the figures. But then at every level, down to managing even a small project, people need to have the basic skills and processes to keep cashflow positive. There are skills and techniques to learn but a lot of it comes down to confidence with numbers. I can’t tell you the number of times I’ve heard a CEO say they were told at the age of 14 they were useless at maths. It can have a long lasting impact!

In a future blog I will look at emotional attachments to numbers but, for this one, I will concentrate on some simple tips to manage your cashflow.

Manage your cashflow effectively:

Tip 1: As mentioned, the cashflow is the ultimate responsibility of the CEO. There needs to be a finance strategy for the organisation that includes goals/targets for cashflow as well as other areas like profit and reserves.

Tip 2: Actually do a basic cashflow on an Excel spreadsheet – sorry, that sounds condescending but you would be surprised how many organisations don’t have one. There are literally hundreds of basic templates out there to choose from and all you need to do is list all your income sources and lines of expenditure.

Tip 3: A useful analogy that worked for me is to think of cashflow as a water tank. Filling up the tank with water is the ‘income’ and draining the tank is your ‘expenditure’. The obvious aim is not to let the tank run dry. It’s all about maintaining the flow in and out that allows you to effectively manage your business.

Tip 4: Credit control is the tool that controls the money flowing into the tank. Areas to really focus on here are your invoice/contract payment terms (number of days) and then have the systems/processes in place to chase/collect the money if the customer goes over the number of days.

Tip 5: Managing the flow of cash out – equally important here are the payment terms you negotiate with your suppliers on the timeframe you pay them. You can also look at options such as leasing instead of buying items outright to avoid big lump sums draining from the tank.

Tip 6: Every organisation should have a set of management accounts
. You need to be able to analyse your financial info to be able to make effective business decisions. The problem is that these accounts usually only look backwards at what has happened financially. This does not help with cashflow. You need to be able to look into the future and forecast what level the water tank is going to be at. Don’t forget you can then measure your progress against your targets in your strategy.

Watch out for more blogs on cash and other business principles for the entrepreneur. Any questions, contact me at

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