Date Added: Jul 2011
One of the most basic business axioms, held dear by all firms but especially small companies, is that cash flow is king. Customer payments are essential to fueling all other business activity from staff salaries, to raw materials, to rent. Growing firms need to be especially attentive to cash flow because sales increases typically require new investments associated with product or service production before payments are received. The ideal is for a firm to have the cash on hand to meet payroll and pay bills on time but not be holding on to more cash than is needed, even when unanticipated expenses are considered. This requires management to apply both art and science, and a company's situation can change significantly in a short period of time, which means that continuing attention to cash flow needs to be an important business priority.