• Lionel Pavey

Cash flow is more important than income

Most people would like more money - "the more I have, the more I can spend." Cash flow represents the movement of money (both in and out) and focuses on the timing. On a personal level, most of us see 1 large income stream per month (salary) and a multitude of expenditure streams every month.

The major problems are twofold - a large amount of the expenditure occurs around the first of every month (mortgage, utilities, insurance), and there is always a period just before the next salary when every penny counts.

Business faces the same problems, together with an extra dilemma - pay on time and incur bank charges, pay late and incur late fees from the supplier. A report from the Wall Street Journal stated that banks in America had revenue of more than USD 30 billion in 2016 from overdrafts. Good for the banks, but a waste of money for the customers.

An alternative approach can be considered - if your supplier wants paying in 30 days, and you will not have all the funds at that time, consider negotiating. Make them a proposal - 40% in 15 days, another 40% in 30 days and 20% in 40 days.

Whilst a supplier would prefer all his revenue on the agreed date, it is better for them to have a client who is happy as they will initiate repeat business.

If you can implement a smooth variable flow, then yourcash flow will remain positive, your supplier will remain happy and your business will thrive.

Interested in more hints? Get in touch with me.


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