Can you guess what the #1 reason businesses go out of business?
It’s running into cash flow problems.
That’s when cash leaves your business faster than cash coming into your business.
So, while a business can be profitable on paper, if the cash from your sales isn’t being received in a timely manner, you could easily go out of business.
I see this happen to a lot of businesses.
In fact, this nearly happened me too – that’s why I know this all too well.
Majority of the businesses in the world aren’t tech startups flush with VC money (and if you’re a startup with VC money doesn’t mean you’re immune to the cash flow problem, many startups encounter this same problem).
So, know how to better manage your business finances is an extremely important skill.
Now, some may think, well numbers and finances aren’t my strong point, I’ll delegate this to an accountant.
That’s a mistake.
As a business owner, it’s your responsibility to know your own business finances. Because if you don’t and you rely on an accountant, they could easily scam you or siphon your business finances without you knowing. That’s how a lot of business fraud happens, when a business owner doesn’t keep an eye on his/her own business finances.
Now, of course, not all finance/accountants are going to scam you out of your money.
But if you don’t take a pro-active monitoring stance with your business finance, you make it too easy to happen.
But since most people are similar to me, not really interested in accounting & finance and have little to no prior knowledge to business finance, this can be a painful exercise.
But it’s still important.
Understanding the basics of how to read and understand your financial statements, knowing when you’re getting cash in and how much you’re paying out.
Here are some resources to help the common business owner and entrepreneur better understand and manage your business finances: