Like many people, when I started my business I read books, visited entrepreneur websites, spoke to advisors, went to workshops and of course, shared, liked, posted many, many entrepreneur quotes. A lot of information stuck with me but cash flow has stuck with me forever. It stuck with me but it had no meaning until 3 years later.
Here’s Google’s definition, “the total amount of money being transferred into and out of a business, especially as affecting liquidity. It meant nothing to me. This definition is the one that resonates; Cash flow analysis is the study of a business’ cash inflows and outflows per cycle, with the goal of ensuring adequate cash flow for business operations.
Another reason I didn’t get it, and this is the truth, I’m a reformed spender. As a reformed spender, when money came in, money went out. It wasn’t until I missed mortgage payments and bills were piling up that I started to realize that my spending strategy would not work if I needed money past the moment I received it. I learned to save but still cash flow was just a term that made me download a spreadsheet from SCORE, fill it out and I even set a task in Asana to check it monthly but it had no real meaning, yet, for my business.
It took me 3 years because it took that me long to create a steady flow and mix of retainer and project-based contracts. This gave me cash to analyze. And more importantly, when I moved to Philadelphia I needed customers quick and wanted to know how much I had to dedicate to growing my business. It was then, my spreadsheet made sense.
My new BFF is my cash flow report. Like a best friend it tells me, with complete honesty, at any moment in time, how much I have to invest, forecasting revenue I will need in the next month, few months a year. More importantly, it has helped me determine how much I have invest in the marketing of my business past networking and social media.
Growing a business is always a time for learning, changing and moving on and I’m so glad that I have moved on to be a cash flow queen!