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Have Enough Cash? Not So Fast!



Our leadership team was meeting last week and looking at yet another round of forecasts. Not one of my favorite things to do but a necessary part of managing the business. One thing I've learned about forecasts and budgets is that they're always wrong. The question will be, "by how much?" 

 

That said, I noticed what had to be an error in our models. As we forecasted sales growth over the next couple of months our cash balance went down. Finally, my big chance to win a point with the finance guy!

He smiled at me (over Zoom of course) and explained, "you sold more last month so we are still collecting receivables from those sales. We had to spend to build those products. As you grow sales next month, you still need to collect this month's receivables based to make that up. It's not unusual to see a business use cash as it re-builds its accounts receivable." 

 

Hmm, that was something new. I guess I will have to find something else to catch him on.

 

For all the business owners out there, consider doing a cash forecast based on growing sales over the next couple of months. You might be surprised.



We Lift Lives

Todd Bick
VP of Sales

 

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