Originally published March 7, 2017
How important is blood to your body? You die if you lose too much! In business, blood is cash. If you lose too much cash, then your business body dies. My last article talked about the 3 Core Functions your business needs: Sales/Marketing function = Respiratory System; Operations function = Digestive System; Finance function = Cardiovascular System.
This article will focus on the importance of your Finance function in your business body . . . Cash = Blood!
Don’t have a heart attack in your business. Keep your financial system strong!
What is a Business Heart Attack?
My father had a heart attack last week which brings these points close to home for me. After a stent procedure, he has recovered and doing well. Thank God! I love you, Dad! My father is very active but has a lot of plaque buildup in his arteries, primarily due to heredity and some due to his diet. So I better watch my own diet!
Your business must watch your own diet as well. This diet comes in the form of your intake to make products/services (materials or information) which goes through your Operations (Digestive System). Poor materials and/or bad information result in extra waste and bad products/services for your business. But more importantly, it affects cash flow in your business because it slows things down. If you have to rework products, it creates delays in getting cash into your business from the customer, while it’s expending a lot of cash to get it done right. In the human body, poor diets wreak havoc in your Digestive System, delaying the processing of nutrients from food which is necessary to get into the bloodstream for health. Poor diets also result in plaque build-up in the arteries which restrict blood flow.
Blood flow in your body is critical in delivering oxygen and nutrients to the rest of your body for it to operate. Cash flow in your business body is critical in obtaining clients and getting the necessary materials/information to create your products. Anything that slows down cash (blood) will make your business body sluggish, operating below peak levels. Or worst, cash flow could slow down to the point where you experience a business heart attack, making the business inoperable.
Strong Financial System = Longer Life
You must keep your financial system strong or you’re doing harm in your business body. Too often I’ve seen great businesses get stuck or have set backs because they neglected their financial system. It may be the last thing they get professional advice/help in because they don’t want to relinquish that control with the flawed perception that they’re doing it fine . . . until they start feeling some financial pain (heart attack). Sometimes the solution is easy . . . hire a bookkeeper to keep finances in order; or more complicated . . . time to hire a true CFO instead of a controller. Your business body needs a stronger heart as you mature so it maintains the necessary blood flow throughout your organization.
For a long business life, you must continually monitor your cash flow. When you have poor cash flow management (whether poor receivable collections or poor expense management), you restrict the flow of necessary cash to the rest of your business body (your employees, capital investments, savings, etc.). This will stunt your growth or worst case, kill your business!
Is Your Cash Flow Healthy?
Imagine your business with a great financial system. Cash is flowing in well. You’re managing your cash outflow, building up your profits (white blood cells – topic for a future post) so you have incentives to pay out and savings for future growth. Picture your business body in this healthy state!
What would that allow you to do towards your vision (both business and personal)? How would that take care of your employees and your clients? How long could your business live?
Are you neglecting your financial system?
Are you feeling dizzy due to poor blood flow . . . or worst, are you feeling chest pains from a heart attack? Don’t neglect the heart of your business!
Take a look at your financial system and get a good measure of your cash flow to see what changes need to be made to be healthier!
Take the Organizational Checkup to gauge the health of your company! For more information on creating a healthy business lifestyle, read about the Entrepreneurial Operating System (EOS).
My next blog will be about the Operations department – Your Digestive System! Remember – food is materials for your products (or information for services).
To Your Business Health!
