The Book

Nearly a third of all businesses will die from cash flow issues.

In any other domain, that would be considered a pandemic. In business, this frightening statistic is seen as “just part of the game.”

But it doesn’t have to be that way. Today, there are systems, processes and tools that help businesses not only survive, but thrive. From near-term cash flow forecasts, through to revenue projections and growth plans, businesses now have access to mission critical data, equipping them to take action.

Innovative accounting professionals are leading the charge, as they upend disruption in their own industry and redefine their roles as advisors. Cash flow management is the new centerpiece of their service.

Pandemic Cash Flow explores the problems businesses face and offers a collaborative and effective solution to crushing the affliction.


Chapter 1

So why is cash flow a ‘pandemic?’ Sounds like an exaggeration, right? Here are some stats:

Half of all businesses will fail within their first five years and cash flow issues are the leading cause.1 In fact nearly 30% of businesses will fail due to cash flow issues alone2 and 82% of every business that fails places blame on cash flow.3

According to Finpacific, 70% of businesses that fail are profitable when they close their doors. Further, they note that businesses only planning once a year have a 36% survival rate over five-years versus those planning monthly, which have an 80% survival rate.

Globally, one out of four businesses will die from cash flow issues. In any other domain, that would be considered a pandemic. Somehow, in business, this frightening statistic is seen as just part of the game. It doesn’t have to be that way. Cash flow forecasting and management can help turn the tide and save businesses, personal fortunes, savings and sleepless nights.

As terrifying as these stats may be, the greatest tragedy is that those aren’t just numbers. The numbers represent people. Business owners with their life savings on the line, families they support, staff that need their paychecks to keep their households running. In the end, the cash flow pandemic is a crushing blow to people who are trying to make a difference in the world.

So what is cash flow?

Formally, cash flow refers to the money that is received by the business as well as what the business pays out. Even though it’s referred to as ‘cash’, the truth is that, in today’s businesses, very little of those funds called cash flow might be in the form of actual cash.

Inflows of money may come in via deposits from credit card purchases, electronic payments or even paper checks. The defining factor is that the payments coming in aren’t ‘cash flow’ until you have access to the funds from your bank account or even your cash register.

Conversely, outflows of money aren’t considered part of the cash flow until they leave your bank account or your pocket.

Cash flow is a simple concept, but with all of the various ways to get paid and make payments, coupled with the delays tied to future due dates, late and even default payments, tracking cash flow becomes extremely complicated.

It’s a real puzzle to decode when money is likely to come and go from your accounts, compounded when an outgoing payment occurs before money arrives to cover the expense.

As complicated as this near-term cash flow is for businesses to manage, poor timing and late payments are not the only factors involved in cash flow shortfalls.

Often, a cash flow problem can be related to larger, systemic issues that will kill a business if they’re not uncovered and addressed. Revenue shortfalls lead the way. Simply put, if your business needs to make $1 million this year to break even, you need the cash coming in over twelve months, not fourteen.

There’s one other thing that keeps your business afloat when things are going well, but can also doom a business when it falls short, and that’s profit. If it costs you $1.2 million to generate $1 million of revenue, your business is in trouble. You need to make $1 million in revenue while spending less than $1 million. Whatever is left over is your profit. A business with plenty of revenue but negative profit margins will slowly bleed to death.

In this book, we will focus on the short-term cash flow issues that tragically kill businesses nearly overnight but we’ll also discuss the overarching issues as well to ensure that you’re paying attention to all three legs of your business, your revenue, profit and cash flow.

Pandemic Cash Flow Cover

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