Channel Eye has joined forces with Royston Guest, leading Business Growth Coach and CEO/Founder of Pathways Global, in our column, ‘Ask the Business Coach’
Managing cash in any business is critical. The simple fact is that nearly every business is both a creditor and a debtor since businesses extend credit to their customers and pay their suppliers on ‘delayed’ payment terms.
Cash can be what stifles the growth potential in businesses, and proactively managing the ratio between these two levers is critical to funding your growth ambitions.
The big three takeaways!
- Cash is king!
- Revenue is the vanity line, profit is the sanity line, and cash is the reality line.
- One measure that matters: is your debtor to creditor ratio.
- [0.29] We’ve all heard the line ‘Revenue is the vanity line, profit is the sanity line, and cash is the reality line’.
- [0.40] Most businesses go bust because they run out of cash, and this is more challenging when we’re coming out of the pandemic or even a recession because the company has used up its cash reserves.
- [1.14] Know your debtor: creditor ratio; your average debtor days and creditor days. Proactively manage your debtors and get the cash in the door. Negotiate your creditor days to ensure it supports your business model, particularly around your debtor days.
- [3.03] Make sure you have only ‘free cash’ in your current account. Do not include tax/vat liabilities in your current account; transfer this to another account, so you only have the cash that is yours in your current account.
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