Cash is the lifeblood of any business, large or small.
When cash runs out, the business goes bust: Ansett, Babcock & Brown, Centro, HIH and OneTel are some of the famous names that went belly up. Thousands of businesses do the same every year, for the same reason.
All bankruptcies are not avoidable: Sometimes the business model is flawed, the market conditions change, or a fierce competitor comes in and ravages everything.
I recall an article in the Australian Financial Review stating that 28% of the business failures were caused by poor financial management!
Those bankruptcies could have been avoided if the business had better planned the cash movements: The periods of famine would have been foreseen and the business would have taken measures to sail through the storm.
The key to this problem is called: Cash flow forecast. Cash flow forecast is not a miracle recipe. It is a tool that all business owners should work on and work with. Read more