• Dr. Anna

Cash is Always King

Large or small, business enterprises need cash to survive and to remain open. This fact might seem obvious, but we live in an era where iconic firms that survived over 125 years of disruptive world events and economic cycles now struggle to survive. The Wall Street Journal chronicled the fortunes of General Electric (GE) , and Sears Holdings within the last year. These two companies, among many others, served as foundations of American GDP (wealth) as well as employers for hundreds of thousands in the past. The added value for diverse American families originating from these firms due to employment, an improved standard of living, and overall quality of life continued over many years, but somehow the growth mechanism of each company began to malfunction.

Basics of cash flow management apply to small, local businesses as well as multi-national global companies. The amount of cash entering the company must cover the costs of its operations while providing a return to the owners. Of equal importance is the timing of cash flows needed to maintain operating cycles, deliver a product or service on time, and fund investments. Losing control over cash can instigate a downward spiral from which recovery is difficult, or impossible in some instances. A fully-vetted financial plan should precede any investment decision, internal or external. Progress toward meeting the plan requires continuous scrutiny. An injection of cash into a business from a lender or investor should always generate an increase in cash flow in the future.