Cash
flow is critical to a business and much like water flowing in a stream to a waterfall;
it’s very difficult to stop the flow. You can divert it, change its path,
create a pool, or make use of damns, but you can’t bring water to a stop other
than finding a way to shut it off at the source.
There are places along the path of our waterfall where the water seems to be very still, others where it is moving at a moderate place and others where it is crashing over the waterfall with a great amount of force. There are places where the water splits between two different paths and later comes back together. There are still others where it ducks underground for a while and then pops up later. Some of the water takes a very direct path while some meanders from top to bottom. Some dirt and rocks get washed away while some hold firm. Along its journey from top to bottom, the water can carry important things (like sticks and leaves) that we send down from the top to see how long they take to get to the bottom.
Think about your business. Money comes in daily and goes out daily. The key is to make decisions about the outflow of money that maximize the success and profitability of the business. Often this means looking for places where you can stop or slow a rate of spending so that the same dollars can be used elsewhere. It might also mean making a long term investment in capital equipment or technology in order to increase cash flow at a point in the future.
The
path to the waterfall has both calm sections where the water seems to be barely
moving and chaotic sections where the water has a lot of turbulence. Does your business have periods or perhaps
departments that are calm while others are turbulent? The turbulence in the
water is caused by rocks that interrupt the smooth flow of the water. Do you have unnecessary obstacles in your
business?
We are able to walk along a path beside the waterfall from top to bottom . . . and while I tend to take it in stride, my little guy always finds something new . . . a stray golf ball or a rock shaped like a turtle on our last adventure. If you walk along the path of your business, are you observant enough to find something new with each trip? If not, perhaps you should have someone join you on that walk and see what they observe about your business. Whether it’s something that your firm does exceptionally well or seems to be a practice in need of change, you’ll likely learn something from the observation.
For
any business, it’s about getting customer dollars into the top of the flow and
managing the path and efficiency of that flow to ensure that you optimize (note
that I did not say maximize) company profitability.
Finally,
at the bottom of the waterfall is a large pool of water. Think of this as the accumulation of capital
resulting from the cash flow of your business.
When you look at your balance sheet, can you see the accumulation of
capital resulting from your efforts?
If your
business could benefit from fractional CFO services, I would welcome the chance
to speak with you. Please give me a call
at (314) 863-6637 or send an email to
For more information, visit www.homza.com
your cash is flowing. know
where.®
Ken Homza
Copyright @ 2014 Homza Consulting, Inc.
Ken Homza
Copyright @ 2014 Homza Consulting, Inc.
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