Hey there, I hope you had a fantabulous weekend. It’s a big yet small world! While others are in the thick of the weekend, others are just beginning it and yet others are quickly concluding it and getting back to work. Some are spending the weekend on the beach while others are traveling across the globe covering unimaginable distances. It’s a diverse and ever lively world. Whatever it is anyway, I’m referring to the weekend that falls around this time and dates I’m writing this blog, with utmost good faith that the calendar you are using is similar to mine. Enough of that now!
Today I would like us to get back to the subject of cash flow. My previous articles on cash flow attracted quite some responses, though it has been a very long time since I wrote elaborately about cash flow again. If you missed the articles, it’s never too late. You could still read Why An Entrepreneur Must Understand His or Her Cash Flows and Why An Entrepreneur Must Understand His or Her Cash Flows – Part 2 if you like. It’s up to you and I’m not forcing you. Ok? Kindly ignore any non-working links you find in the original post. There are some very good and free articles on the net that could make entrepreneurs wiser but some people don’t care about them at all. It’s not a surprise then that we see routine failing businesses. Entrepreneurship requires wisdom. Don’t you agree with me?
So, what’s up today again regarding cash flow? I simply want to go a little bit beyond the aspect of liquidity and solvency with cash flow. For many entrepreneurial and business folks, a mention of cash flow simply makes people run to the aspects of liquidity and solvency. Liquidity, or the ability of a business to settle its liabilities or debts as they fall due; and solvency or the long-term financial stability and viability of the business, including ability to settle long-term debts and remain in operations, are two different things but are often related to cash flow. While liquidity is short term and relates to short-term cash flow, solvency is a long term measure.
Just a point of clarification, I’m not here to scientifically and unscientifically define and distinguish between liquidity and solvency today. As I mentioned above, I would like to go a little bit beyond the aspect of liquidity and solvency with cash flow. What is the importance of managing cash flow beyond liquidity and solvency? Are there some other values other than liquidity that an entrepreneur gains from properly managing her or his business cash flows? Does cash flow affect other business operational areas and issues that are beyond the ability to settle debts and liabilities as they fall due?
Let’s take a look.
By the way cash management is part of treasury management though treasury management is much broader – covering management of cash, investments and other financial assets of the business. Big companies place quite a lot of importance on treasury management, involving cash management too. Get me right here. I’m not saying that small businesses do not need to properly understand and manage cash flows. All business of whatever nature and size need good understanding and management of cash flows. Period!
In conclusion, my additional opinion is that you could deploy technology and automation, in cash or treasury management in order to improve your management. I do hope I have added some value to your business or yourself through this blog today. Haven’t I? Come on. Speak the truth. Even if you have very negative feedback for me, please proceed and let me have it. Bitter medicine is good because it may help cure diseases, but don’t be vain just for the sake of negativity and feedback. Ok?
With every good wish and till then,
The Wise Entrepreneur