This month we delve into the minefield of those pesky, slippery dollars, and our goal is to not be singing an old Peter, Paul and Mary song! Where are they? How do we manage them to stretch or grow our companies? In the face of rising prices, how do we stay in business?

               Let me tell you a little story. It’s about a man who lived simply and eschewed time-honored ways of bank loans or buying on time. He lived by the adage of, “Use it up, wear it out, make it do or do without.” He earned a modest income yet managed to leave a fortune to his children. While his legacy continues to bless his children financially, it was his life lessons that resonate with succeeding generations. I never really knew my own father, but my father-in-law was a giant of a man.

               What does this have to do with our businesses? Everything. Managing cash flow for a family is very like managing cash flow for a family of employees, just on a grander scale. Stretching those dollars to cover the enormous challenges our businesses face often feels daunting, but it begins with a very simple step: track your cash flow. Turn to financial experts who publish formulas to calculate things like free cash flow, operating cash flow and your cash flow forecast…but these are diagnostic tools. Conventional wisdom includes practical steps affecting timely invoicing and inventory management, and we’ll get to those this month. Yet the very first step is a simple one: Learn where your money goes.

               Your cash flow cycle requires tracking the time it takes to acquire raw materials, turn them into product, sell and collect payment for them. Some of us produce thoughts or flip houses or sell services—but whether you can tangibly hold your business in the palm of your hand or not, there is a cycle between the genesis of your effort and the dollars you hold in your hand. That arid stretch of time is one all business owners must not just survive but learn how to navigate.

               Not surprisingly, insufficient capital is the #1 cause of business closures. Are we doomed? Not by a long shot! The desert no-man’s land of disappearing dollars is managed first and foremost by learning how your assets were spent.

Where did the money go? 

Are these recurring expenses?

Cash flow management revolves around being able to answer these two questions. Answering these questions does not require a degree in accounting. Simple efforts will suffice.

Get a small ledger and categorize expenditures. If the bulk of your spending is done via a credit card, this is a pretty simple step. If you spend your greenbacks in tangible form, collect receipts and enter them into appropriate columns.

In his book, Never Run Out of Cash, Philip Campbell offers simple ways to analyze and deal with limited funds. He’s readable and knowledgeable, and his advice is palatable. Yet he, too, begins with knowing where your money goes. As you look at your fiscal health on the printed page, patterns and issues jump out at you. These glaring revelations form the basis for decision making, the life-saving interventions that keep your business healthy. Next month, let’s look at some of them in greater detail.