In over fifteen years of interactions with literally hundreds of businesses, I have seen companies grow from start-ups to major corporates, but on the flip side I have also seen a number of businesses with potential fail. While businesses succeed for various reasons, there’s a key principle which I’ve seen cuts across all sectors:
You need to FOLLOW THE MONEY.
Why is this important? Following the money helps you track your cash flow and when you track, you can better manage how much will go out, even if you can’t predict how much is coming in that period. The truth is a lot of businesses don’t keep even the simplest records and this is a costly oversight. Keeping track of all monies going out and coming in doesn’t have to be complex and there are a lot of free/low cost tools available to help your business achieve this. Following the money also helps you identify your key sources of income. You can easily identify which activities, products and customers are generating the most income for you. This helps you focus on the areas that will drive the growth of your business and also helps when making critical decisions on which products to discontinue or customers to ‘sack’. Cash/liquidity is the lifeblood of any business. Most businesses don’t die because they run out of profit, but they certainly die if they become illiquid. When you follow the money, you know when you are most likely to run ‘empty’ and can plan in advance to bridge that gap. At the end of the day profit may be vanity, but cash is king.