by Tina on August 2, 2010
In the English language, a simple definition for the word “Ace” is an expert at something.  When I hear the word, I often associate it with sports, being a big sports fan. The best pitcher on the baseball team is known as the “ace”. A hole in one in golf is termed an “ace” and , of course, that tennis serve made without the opponent hitting the ball is an ace.
What came to my mind recently was a memory from my high school drivers’ ed class. Our instructor told us to always strive to be an ace driver. Of course, he was encouraging us to be the best that we can be! He told us to remember the term this way: A – Alert C – Courteous and E- Educated. This is great advice. I was thinking about this advice the other day while driving here in Florida and it occurred to me that we should also strive to be an ACE in our business situations. Yes, of course, we all strive to be the best that we can be! But are we alert, courteous, and educated?
Being alert(attentive) to a customer’s needs and ready to act? Being alert serving our customers means to be on the ball, being aware of their situation and being prepared to assist them. How many people do you know that make a habit of being courteous? (don’t think of the roadways here, please) Being courteous in business means being polite and well-mannered and considerate to your customers and prospects. An educated business owner is knowledgeable, skilled, well -informed. You may not have all the answers but you know how to find them to help your customers.
Be an ace, always strive to be the best at what you do!
In the simplest terms, cash flow is the cash going out and coming in to the business. Cash flow is a revenue or expense stream that changes a cash account over a given period. Cash inflows usually come from one of three activities – financing, operations or investing. Cash outflows result from expenses or investments. This holds true for both business and personal finance. How important is it to be aware of cash flow? Bear in mind that more businesses fail for lack of cash flow than for lack of profit.
A business can generate an accounting statement called the “statement of cash flows”, which shows the amount of cash generated and used by a company in a given period. Although, cash flow can be used as an indication of a company’s financial strength, most businesses overlook this important tool!
It is important to understand that sales and costs and, therefore, profits do not necessarily coincide with their associated cash inflows and outflows. This is because that although a sale is secured and goods are delivered, the related payment may be deferred as a result of giving credit to the customer or simply because the customers are slow paying! Meanwhile, payments must be made to suppliers, employees and used to purchase new equipment and so forth. What does this all mean? Well, the net result is that cash receipts often lag behind cash payments and although profits may be reported, the business can experience a short-term cash shortfall. This is why it is essential to forecast cash flows as well as project likely profits.
The good news is it is easy to produce a computer generated a cash flow statement and to do a projection of cash flows using Quick Books software. Used effectively, a projection can help prevent major planning errors, anticipate problems, identify opportunities to improve cash flow or provide a basis for negotiating short-term funding from a bank.
Please Note : When preparing cash flow projections, be aware of the following risks:
- Overstating sales forecasts
- Underestimating costs
- Ignoring historic trends
- Making unduly-optimistic assumptions about the availability of credit
These problems can arise as the result of a lack of foresight or knowledge, or because of excessive optimism. New business owners can achieve the desired results by consulting with a professional to understand cash flow projections.
Tagged as:
cash flow,
profit,
projections
