Another super article from one of our Peak Consulting GmbH colleagues Galina Vankova. This is so true and something lots of business founders find difficult to appreciate, especially the one that "Increasing Sales Automatically Improves Cash Flow". Profitable sales are critical which requires a deeper understanding of the wider dynamics that satisfying those new sales contracts will have on the business. Thoroughly understanding the timeframe relating to getting paid for those sales and how that will impact the company cashflow is also essential. Great insight Galina Vankova
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🚀💡📌Myths about Cash in Business: What's True and What’s Not? Cash flow management is essential for every company, regardless of its size or industry. Yet, there are many myths about the best ways to manage cash that often mislead business owners and financial managers. 👉Myth 1: Profit Equals Positive Cash Flow and vice versa This is one of the most widespread myths in business management. In reality, profit and cash flow are different concepts. While profit reflects a company’s profitability, cash flow shows the actual availability of funds. It’s possible for a company to show profit on paper but still struggle with payments due to insufficient cash. This is the most common reality for businesses without any concept of cash management. 👉Myth 2: Having Cash Reserves Indicates Inefficient Resource Management Many believe that holding large cash reserves is a sign of missed opportunities and poor capital management. But the truth is that an adequate cash reserve is essential to cover unexpected expenses and maintain stability during temporary revenue drops. Reserves can help a company avoid costly short-term loans in critical moments. 👉Myth 3: Increasing Sales Automatically Improves Cash Flow Sales are important, but growing sales doesn’t always lead to better cash flow. For many companies, especially fast-growing ones, high sales can mean higher inventory needs, larger upfront payments, and extended receivables collection periods. This can strain cash flow and necessitate additional measures to maintain liquidity. Also doing the sales, without collecting the receivables shortly is one of the biggest issues that many company faces. 👉Myth 4: A Successful Business Doesn’t Need Credit Lines Many business owners believe that if everything is going well, there’s no need for a credit line. The truth is, even successful businesses can face temporary cash difficulties, such as seasonal fluctuations or unforeseen expenses. A credit line can provide flexibility and serve as a lifeline when needed. Also when you plan an expansion of the business, sometimes it is better to use external resources. 🧐💸📈If you want to know more and how to deal with the cashflow better in your business, write me a DM. Do not put away this process on itself to avoid further challenges. #acccounting #management #managementreporting #business #businessanalysis #finance #b2bservices #businessowners #financeanalysis #бизнес #founders #businessandmanagement #businessanalyst #leanmanufacturing #cfo #leanCFO #leanfinances #leanaccounting