Cash (Flow) is King

Looking at a company’s bottom line is not the best way to find a good company. Many companies will be asking for terms but are they worthy?

Financial results are hard to predict in a recession, plus there are many ways a company can “dress up” the renumbers to make themselves look better than they actually are.

A company can be profitable yet unable to pay its bills on time. If it is unable to borrow money it might struggle. As always but more so in a tight credit period having a healthy cash flow is the key to day to day solvency and growth.

At the most basic of levels net cash flow reflects the cash generated though sales of goods and services along with loans and other items and payments made in a set period of time. It is the raw measure while profit, which can include sales where payments have not yet been collected can be (easier to) manipulate.

Larson note: Cash is what makes the wheels of business move. Slow payers push business into difficult periods. As I tell my customers I am not a bank. So watch your accounts and don’t let them push your company over the edge.

At the same time remember growth has a cost. This can be a great growth period for a progressive aggressive company. You can only grow as fast as your cash or credit allows you to grow. Payroll, inventory, operating supplies all to up as you grow, tying up resources.

And one word on credit, there is a cost of credit. If what you use the money for does not offset the interest rate paid out, it’s not worth it


Howard Larson
Larson & Associates
Target Marketing & Telesales Professionals for new account acquisition
Making good businesses great and great businesses even better
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