Learn how to help your business survive and thrive by understanding your numbers. The one thing you really need to keep an eye on is money in the bank.

Why is cash so important?

Cash is important because if you have no cash in the pipeline and no access to cash, then you won’t be able to pay your suppliers or staff and you won’t be able to invest. Things will ultimately come to a halt. It doesn’t matter how big your business.

The one thing that determines survival over anything else, is that cash item. For any business, you need people to supply goods and services to you.

Where does that money come from?

The main source of cash should be money that you draw or money that you borrow. There is a risk there involved to invest for profit later. You may have items you don’t actually need any more that you wish to sell. The core of cash should come from your customers. Customers are the one’s that are paying your bills.

Get more acquainted with looking at your company’s bank accounts. Look at the items going in and out of that bank account. Then you can determine what is necessary.

Remember when you look at your bank balance, there may be times that things look very healthy. When looking at that money, how much of it is actually yours?

Learn more about cash being the lifeblood of your business, not being scared of what’s going on with cash and how to be more aware of your numbers during this episode.

In This Episode

• What’s been important to me in my business?
• 
  
• Cash in your business
• 
  
• Connecting closely with your numbers
• 
  
• The future prosperity of your business
• 
  
• Generating future business
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• Understanding payments and commitments

Links

https://www.proactiveresolutions.com/

https://www.linkedin.com/in/proactiveresolutions/

https://www.instagram.com/mahmoodnumbersrockstar/

https://twitter.com/mahmood_reza

https://www.facebook.com/proactiveresolutions/

You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi folks, and welcome to episode number two of the I Hate Numbers podcast. Thanks a great deal for everyone sharing their love and thoughts from last week's episode and this week when I was thinking about what topic should I be talking about on the podcast, I was thinking, okay, what's been important to me in my business, my clients’ business, other businesses I see around the world,

the one thing that if you do nothing else at all, you need to keep an eye on in your business here that's going to make sure not only do you survive, but you thrive and you're here tomorrow, the next week and the year after? That one thing that you need to really keep an eye on is money in the bank. Cash, cold hard cash.

The cash that you can see on your bank statement, that physical stuff, the coins, the notes in your wallet or your purse. Now, a question you might be asking yourself is, you know, why is cash so important? Cash is important if you take the example of you're driving in your car, if you've got no fuel in the tank, your car could be the best looking car in the world, but it's not going to go anywhere.

And it's exactly the same in your business. If you have no cash in the pipeline, if you've got no access to cash, if you've got those resources that are missing, then you won't be able to pay your suppliers, you won't able to pay your staff, you won't be able to invest, you won't be able to take money out for yourself, and effectively things will come to a grinding halt.

Now, if you're thinking there, well, you know, it doesn't really apply to me. It only applies to the big boys. It doesn't matter how large your business is. You could be an acorn-size business. You could be a dramatic oak of a business. You could have been here for several years, or you could be a relatively new kid on the block.

The one thing that determines survival, above everything else is that cash item. Again, you may be thinking about, you know, why is it so important? Well, have a think about the impact on there. In order for you to operate your business, you need people to supply goods and services to you, so you need to buy materials.

If you're making things, you need to perhaps hire staff, hire freelancers. You need to spend money on running your office. You need to spend money on a whole variety of things, marketing campaigns are the like, in order to keep that business operating. Now, if those individuals and businesses are willing to say, have the item and pay us later on, if you aren't able to honor that and pay your bills on time, then a number of things will happen.

Some may cut you slack and say, that's fine. Pay us as and when you can. The likelihood of that occurring that often is going to be few and far between. Number two, they may, because they have their own businesses to run, expect you to pay promptly, and if you don't pay them, then they will cut supplying you.

Now, if that supplier is important to your business and you are, they're not supplying you, you are going to find it very difficult to operate without them. In a worse case scenario, if they feel that you're not actually cooperating, you're not playing ball with them in terms of paying their bills, then they can actually seek to have legal address against you and you'll end up going to court.

And again, that's going to be a very tricky time-consuming and a reputational impact to your business there as well. Not something you want. Follow the same thing, if you've borrowed money from the bank, banks will want to be repaid. If you've got staff and you don't pay their wages, a) that's not a very good thing in the first place,

but secondly, loyalty only goes so far. Staff have got families, they've got money they need for their own lifestyles and living. Therefore, if you can't pay them, they'll probably go elsewhere. So, if you don't do that side of the equation paying out, then you're going to find it very difficult. Now, where does the money come from?

Well, predominantly the main source of that cash coming into your business should be your customers. Other potential sources that you might want to draw on are money that you borrow. Now, I'm not against businesses borrowing money. There are situations where that's absolutely essential. If you're investing, if you're starting up, if you are diversifying into a new product area,

there's a risk there involved that you've got to invest and spend money now in order to generate those benefits into the future. So, borrowing the money may be a very sensible thing to do in itself. You may effectively use your own funds, introduce that into the business. You may have items that you don't actually need anymore in your business, which you may wish to sell, but fundamentally, the core of that cash should come from your customers.

Customers are the ones who are going to be paying your bills, hopefully giving you enough over the bills so you can keep that as a surplus. What do you need to do? Well, one thing you need to do is to connect closely with those numbers that are flowing through, and as a little tip that I'm going to share with you

now, is get more acquainted with looking at your company's or your business bank accounts. Now, you might think, well, I do that all the time, Mahmood, I look at the balance. Well, what I'm thinking is drill a little bit deeper and actually have a look at the statements that are generated. Now, some people that I meet, they're very wary of actually connecting to their bank statements.

Having looked at them, they might get quite scary, quite wary. They're going to think, oh my God, this is going to be so depressing. But you look at your bank statement, have a look at the items going in and out of that bank account. Now, the reason for doing that is because if you are familiar and you are comfortable with the money that's going out,

then you might be asking yourself, okay, what is, are those items going out of my bank account? What am I paying? And then you can have that conversation with yourself or your partners to think, are those costs necessary? Are those investments necessary? You can challenge them and become more familiar with what's going on?

There will be items that you can't avoid. There will be items that are essential for the future prosperity of your business. So, you might be buying equipment. You might be paying off a loan. You might be paying out for staff and freelancers. You may be paying out for a whole variety of things, and the whole purpose of that is to generate future business for yourself.

So, it's not saying get rid of it, but actually is there a business case? Does it add anything to your business bottom line, and your business prosperity, and the ability of your business to reach further? Have a look at the last two or three months here and you'll probably see a regular pattern of items that go out.

Now, whether what you do with that, you need to actually understand what those payments are. You need to have a look at them and you mustn't be wary of them because they will be commitments that you have all the time. The other thing that I will share with you is remember when you look at your bank balances, there are occasions when they may look very healthy.

Fantastic. Thumbs up from me in virtual space. However, ask yourself of that money that's built up, how much of it is yours? So, are you collecting money to pay over to other people? So, if you employ staff, you're going to have PAYE. If you've got a lot of cash that you've received already, brilliant. Then obviously what that means is that you might have to pay some of that out later on to actually for bills that you haven't yet come through the system.

Things like suppliers, freelancers, and the like. So, get a handle on what belongs to you. Now, in next week's podcast, I'm going to be talking about how you get people to pay on time. So, focusing on that ability to actually get those customers to actually part with their cash more promptly. Okay, we’re going to wrap the show up here.

I hope you've liked that. Let me just summarise some key things from this podcast. Number one, cash is the lifeblood of your business. It's the fuel that goes into your business car, and obviously the business car is your business. If you don't have cash cycling through, if you're burning cash at a rate of knots, if you are consuming, gobbling up cash, and having keep an eye on it, however brilliant your idea is, however innovative you are, however wonderful you think it is, it's not going to continue,

and you have to do something else. Secondly, don't be scared of what's going on with the cash. If you are aware what that cash in and out is, then you can do things about that. There are tactics we can adopt. There are tips that we can share to actually say, if I know I've got a cash problem coming up, what can I do to solve that?

And there's lots of things you can do, but you need to start connecting more so of the ins and outs. My name is Mahmood. I hope you've enjoyed this podcast. If you've liked the podcast, which I hope you do, then please give it a thumbs up. Share it with your friends, families, and acquaintances. Check out the podcast notes.

The show notes, I think they're called in posh terms. Faith in that. Have a great week everybody. Love and peace. Ciao. We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.