Finance March 9, 2010 Last updated January 11th, 2022 2,383 Reads share

Caught in a Company Cash Challenge?

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Like many companies out there, ranging from SME’s to large long-established and venerable household names, are you and your company caught in the Cash Challenge? By cash challenge I mean are you experiencing problems with cash-flow or lack therof?

Nowadays there is a large tendency out there to focus on Profit margins and driving sales, which of course are some of the most important aspects of business practice; but there also seems to be a frightening inclination towards forgetting about company cash-flow which is a major contributing factor in the closure of hundreds if not thousands of companies every single year. This terrifying trend is particularly pertinent in today’s turbulent times.

Cash is King as nearly everyone has become so incredibly fond of telling us all these days. More correctly, Cash-Flow is the Lifeblood of EVERY single business; numerous forms of research by banks and accountancy practices have all confirmed that poor Cash-flowkills more businesses than any other single factor.

What I am about to explain might sound amazingly simple and totally unworthy of clarification, yet it is truly mind-blowing to discover just how many businesses are totally focused on producing the product/service, selling it and delivering it but who never spare much thought for the collection of the money then owed to themselved and their business. It’s important not to be under the allusion that I am only talking about small or start-up businesses because very large and long-established businesses also fall into this category from time to time when they neglect to keep a tight eye on their Debtors – many are being forced into Receivorship, Examinorship or Liquidation.

Unfortunately not every business-person fully understands the importance of cash-flow so let me try and explain what I mean by Cash-flow being the Lifeblood of every business.
You conceive an incredibly innovative or creative business idea, you open your business, you supply this phenomenal product with its endless advantages, you identify your market and proceed to sell to your customers to their satisfaction as well as your own BUT selling and receiving money or cash for goods sold are entirely different.

Your business can only possibly survive if physically collect cash for your sales as well as actually making them – €400,000 in Sales looks nice but not if only €50,000 of it has been paid for. Your Balance Sheet will look fine with a massive (and even growing) figure for Debtors, your operating capital will be used up and you will quickly run out of cash with which to pay your monthly or weekly bills such as Salaries or Wages and your own Suppliers. This means that you become the debtor or the bad guy towards your suppliers (and possibly even your staff) due to your debtors not paying you.

The traditional Irish attitude of trusting that certain businesses are completely gilt-edged and will eventually pay their debts without fail is no longer to be relied upon in today’s society. Every single business operating in Ireland today should be using every available resource to ensure that their Debtors are Minimised and their Cash balances Maximised.

Laura Kelly

Laura Kelly

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