• 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.

Cash flow more important than income

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