What I Learned About Cash Flow The Hard Way

In 2012, I learned a valuable lesson. It’s not something you hear about from your family or friends. Most never wish to speak about it publicly and most never bounce back. Me, on the other hand, I bounce back from anything, and I did in fact bounce back from this. But let me tell you…it was NOT easy. Cash flow killed my company of 12 years and left me holding nothing but debt, summons, liens and lawsuits.

I started my company in 2001 as I was heading back from a job interview. I got a call in the car from a former investor of mine. In the morning, the company was formed and it grew and grew and grew. Over the next 7 or so years life took off and we did great things.

Then 2008 came. The world changed and our company suffered. But we persevered and made the necessary changes, but it was never again like it once was. Gone were the days of doubling revenue year over year. Several things would happen that affected our future. Some of it was manageable and some of it foreseeable. But the one thing we knew we had to fix fast was cash flow. Every day it got tighter and every day I worried a little bit more.

We never gave up along the way. We even partnered with a massive retailer that “could’ve” helped us achieve greatness, but it wasn’t to be. Morale was suffering, shareholders were frustrated, my nerves were fried, but we kept on going.

In the last 180 days, our team developed a cash flow tool to analyze daily sales so we’d know if we were on track, and if not, how much we had to make up the next day. It was an amazing tool. Sadly, we waited too long to build it. It told us if we were bleeding cash and it helped us determine the best time for a promotion. It gave us a ton of information, in an instant. If only we had thought of this sooner…

In the end, the company collapsed. I learned a lot during that period. I have learned even more since. Cash flow is so important and when it slows, disaster is looming. You have to know, but how? Financial statements are a tough read (We have a course called Understanding Your Financial Statements at schoolofbookkeeping.com). You must build a tool, like the one we built, and you need it on day one. Or, you can simply check out CashFlowTool.com. If I had this thing back then…oh to dream…

P.S. check out this free WOWbinar we are doing a week or so after the end of tax season. It’s called The Speed of Cash – How a Smart Accounting Pro can Spot and Avoid Client Failures and it’s free to any and all. Register here.

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