04/22/2001 Entry: "Cash Flow is King"
In line with my rather pathetic previous entry, but on a different level, one of the things that I've learned as a small business person is that cash flow is king. It doesn't matter that you might have $250k in accounts receivable if you only have $10k in the bank when payday comes around. Learning to manage the flow of cash is, to my mind, one of the most difficult skills of the small business. It's one reason that we have to be very pushy about getting paid in a timely fashion. It's also one of the reasons why we demand payment up front for a portion of any work that we do. (Of course, we also want money up front to prevent clients from skipping out on their obligations. And if you don't think that happens, you're either luckier than we are or you've never been in business.) Another thing you learn as a small business person is that you always have to pay your employees before you pay yourself. They're counting on that cash and you're responsible for providing it.