Each Of The Following Causes A Cash Flow Problem Except Plan for Survival: Treat the Causes, Not the Symptoms

You are searching about Each Of The Following Causes A Cash Flow Problem Except, today we will share with you article about Each Of The Following Causes A Cash Flow Problem Except was compiled and edited by our team from many sources on the internet. Hope this article on the topic Each Of The Following Causes A Cash Flow Problem Except is useful to you.

Plan for Survival: Treat the Causes, Not the Symptoms

Entrepreneurs are a funny bunch. They always seem to enjoy working “on the edge”. Their motto seems to be “these days, if you’re not living on the edge, you’re taking up too much space.” However, this does not mean that we can forever accept a “successful” management approach and ignore the constant advice of financial experts to plan, plan, plan and instead wait, wait, wait, until it is too late!

Neglecting the practice of preventive maintenance, some entrepreneurs wait for symptoms of a problem to appear and then react. Usually, they would wait until they got really sick to see a doctor based on the theory that “if it ain’t broke, don’t fix it!”

In the business world, of course, we romantically refer to this approach as entrepreneurial spirit… a bankruptcy, a gut feeling. Don’t get me wrong; I firmly believe in those views. But they should be placed within the structure; a framework that exploits strengths and underpins business weaknesses by treating root causes, not symptoms.

One of the main causes of business failures is the lack of proper financial planning, which most of the time results in a serious cash flow problem. However, trying to solve cash flow problems without analyzing and treating the root causes is a worthless exercise and a futile attempt to treat the symptoms and ignore the causes.

So what are the root causes of cash flow gaps?

In addition to external factors beyond business control such as political, economic, environmental, social, technological and competitive factors, the main causes of cash flow problems are internal factors. Although businesses may not be able to control external factors, they can reduce the impact of these external factors with proper planning and preparation. Apart from the global economic crisis and the tightening of credit policies, the most significant external factors that have had a major impact on businesses in Australia are the recent floods, hurricanes and fires that have ravaged the country and caused many businesses to fail with huge numbers of businesses falling like autumn leaves.

Despite this, internal factors are completely under the control of the business and are the root cause of lack of cash flow for entrepreneurs. Some of these causes include but are not limited to the following:

1. Poor profitability: Mainly caused by lack of strategic planning, lack of clarity and focus, and lack of consistent and meaningful marketing strategies

2. Over capitalization: Entrepreneurs are risk averse and therefore may make investment or purchase decisions without proper research. Buying new office space or purchasing assets that do not generate reasonable returns can put the entire company in a cash flow bind.

3. Lack of financial planning: Unpreparedness for sudden business emergencies and unforeseen sales declines.

4. High level of indebtedness: Using other people’s money and excessive borrowing which leads to the company defaulting on loans etc.

5. Unplanned and uncontrolled growth: One of the catalysts for business failures, unplanned growth can stretch business resources and cause serious trauma to the entire operation. For example, if a business owner does not understand the relationship between average cost per unit or sales to the bottom line, he or she could over-trade and cause the business to foreclose. The reverse can also happen when the business is traded.

6. Poor control of debtors, creditors and inventory levels: Called the silent killers of cash flow, these three factors are the epicenter of business and any failure in one of them can cause severe ulcers in the entire body of the business.

7. Not putting away the taxman’s money: They say two things are clear in life: death and taxes, GST, payroll tax etc. including employee fringe benefits, work cover are all payments that have to be paid regardless. Again, some business owners take the liberty of withdrawing more cash from the business than the business generates, consequently taking supply away from the business.

8. Financial illiteracy of the entrepreneur: If the entrepreneur does not have financial literacy and does not make business decisions based on sound and regular financial statements and analysis, then the entire operation will be ineffective and will suffer sudden death due to cash flow measures.

9. No Internal Controls: A lack of business systems, procedures, policies and checklists is a recipe for disaster, especially when it comes to tracking overdue invoices, business expenses, KPI reports, business goals, etc., leading to a major misalignment between business goals and their missions.

I always say “doctors bury their mistakes, entrepreneurs bring out their entrepreneurial spirit” Having said that, early diagnosis by a good doctor can save people’s lives. Similarly, early diagnosis of the cause of cash flow can save your business and save you a trip to the hospital to treat an ulcer!

No longer relying on the profit and loss statement is enough for entrepreneurs to navigate their business through the current treacherous business environment. Ensuring a healthy business with a reliable source of cash flow through timely strategic financial planning, reporting and decision-making is paramount to the survival of today’s entrepreneurs and their businesses. This will certainly lead to early diagnosis of cash flow problems and will result in treating the cause rather than the symptoms.

Video about Each Of The Following Causes A Cash Flow Problem Except

You can see more content about Each Of The Following Causes A Cash Flow Problem Except on our youtube channel: Click Here

Question about Each Of The Following Causes A Cash Flow Problem Except

If you have any questions about Each Of The Following Causes A Cash Flow Problem Except, please let us know, all your questions or suggestions will help us improve in the following articles!

The article Each Of The Following Causes A Cash Flow Problem Except was compiled by me and my team from many sources. If you find the article Each Of The Following Causes A Cash Flow Problem Except helpful to you, please support the team Like or Share!

Rate Articles Each Of The Following Causes A Cash Flow Problem Except

Rate: 4-5 stars
Ratings: 5392
Views: 69692132

Search keywords Each Of The Following Causes A Cash Flow Problem Except

Each Of The Following Causes A Cash Flow Problem Except
way Each Of The Following Causes A Cash Flow Problem Except
tutorial Each Of The Following Causes A Cash Flow Problem Except
Each Of The Following Causes A Cash Flow Problem Except free
#Plan #Survival #Treat #Symptoms

Source: https://ezinearticles.com/?Plan-for-Survival:-Treat-the-Causes,-Not-the-Symptoms&id=5891858