We have recently seen a notable increase in the number of high-profile bankruptcies. The names of the failed businesses aren’t important; what matters is that they all have one thing in common. They all had more debt than their operating cash flow could cover while funding day-to-day operations.
The number one law of business is that when you are out of cash, you are out of business. Put another way, it’s an ownership failure. Whether it’s the board of directors representing shareholders or a sole proprietor, anytime ownership allows management to take on new debt, they better earn returns on the debt investments in the business greater than the cost of the debt, or they will burn through cash working to pay daily operating costs on top of debt repayment obligations that are like an anchor robbing the business of needed cash to operate.
Below are related business insights and other site resources to help you better appreciate how cash is the “lifeblood” of every business, regardless of size. Everything any business does over its existence depends on available and predictable cash flow. Making cash available to the business is the most critical concern for management. And every time a business loses control over its cash, it will quickly find itself in financial trouble.
What happens to a business that runs out of cash?
Ten ways to start improving your business cash flow today
How to stop being anxious about your business cash flow?
BusinessCPR™ Mastering the Math of Cash calculator
Five areas of your business to know better today to earn more money tomorrow
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