Cash is the life blood of any company. I won’t say it’s the most important part of a company – but it’s the most critical. If the blood stops flowing you don’t get to do the more important things.
Here are some articles and posts I’ve written on cash and how to manage it.
Why do you spend money?
Most accounting programs are good at telling you what you spend money on. But not why. For example, you probably have a line item in your P&L called Postage. But money spent on a stamp to send an invoice is spent to get money from an existing customer. That’s a different reason than money spent on a stamp for a direct mail piece designed to get you a new customer. Trying to get more profitable by saying “Cut our postage costs in half” is like trying to do brain surgery with a pick axe.
Here’s a visual overview of the four reasons. Where Does the Money Go?
UPDATE: I’ve decided there are FIVE reasons because I moved Cost of Sales from Overhead to it’s own section. The visual overview reflects this.
[tags] accounting, cash flow, money [/tags]