Cash Flow and the advice of James Caan

Posted in society

Thursday, December 13th, 2012

This was some advice that I thought was worth sharing, from Dragon’s Den Entrepreneur, James Caan.. sometimes it is the common sense bits of business that we forget.. and I definitely concentrate on winning business over being paid, so I thank the Lord for my sister, Anneliese , who makes damn sure that doesn’t happen….

“IF I had to give one piece of advice to anyone who is thinking about running a business it would be to make sure you get your cash-flow working efficiently from the outset.

The success or failure of a company always comes back to one thing – the amount of cash or liquidity there is in the business. It’s probably the most important thing I learned from my Father.

Every year far too many perfectly sound businesses go into administration because they simply run out of money and can’t pay the bills.

It seems that nowadays senior managers have become more interested in strategy, marketing and theory rather than concentrating on the fundamental building blocks of business.

As Chairman of over 30 businesses, I spend a lot of time debating cash-flow with my senior managers. I am quite strict on payment terms and I always tell them that it is unacceptable to have too many entries in the 90 day column. As a business owner, you should know exactly what payments are outstanding and how long they have been waiting for them.

Payment terms should also be an essential part of any deal negotiation. In my experience people often get carried away with winning the work and then forget getting paid.

I think it’s perfectly reasonable to expect to get paid within 14 to 30 days. Every day you are not getting paid you are losing out – far too many companies are happy to sit on payments. In effect, what they are doing is using you as a source of free credit.

True entrepreneurs should always have a grasp and understanding of their cash-flow… it’s the foundation of any business. Remember the old adage … cash is king.”

And an extra  lesson from my mum who ran her own immensely successful business for many years and I have held onto.. “Turnover is Vanity, Profit is Sanity”

So for 2013 may we all get back to basics of running profitable businesses, we may not earn as much as we did in the 80’s and 90’s but those days are not realistic in today’s world, and I believe a lot of the hens that have come home to roost have been because we, as a world, sometimes forgot the basic lessons of  business..