According to SCORE mentor Hal Shelton, cash flow problems often cause small businesses fail. Cash flow isn’t difficult to calculate, but it needs to be projected on a rolling 12-month forecast. Furthermore, just because a company is profitable, that doesn’t mean it won’t face cash flow crunches. Shelton adds that cash flow isn’t just an accountant’s job; the business Founder/CEO needs to stay on top of it. He also points out that it’s possible for a company to have too much cash on hand, as this may be a sign of a company being too conservative toward new opportunities.
Key Takeaways:
- Data shows about half of new small business enterprises in the U.S. fail in the first five years.
- U.S. Small Business Administration suggests this has largely to do with cash flow and mismanagement.
- Many business people mistakenly assume that preparing a once yearly cash flow is sufficient, when in fact once a month, or even weekly is far wiser.
“Fundraising is a very time-consuming process and is usually disruptive to managing the ongoing business.”
