Showing posts with label cashflow. Show all posts
Showing posts with label cashflow. Show all posts

Thursday, August 1, 2013

Are you making Balance Sheet for Self Use ?

Deep Pocket , Ignorance or Business Operations/ (realised) Profitability is keeping you happy in times of economic distress  ? 

Entrepreneurs with deep pocket is surviving thinking that this shall go and we will come out winners , many hand to mouth competitors will die. 

Ignorant Entrepreneurs have no cue what is happening and whether they are in financial trouble. As long as their cash flow is ticking they think they're are safe. 

& the last one is rare class of entrepreneurs thriving and flourishing on true business operation and profitability. They are able to produce, sale and recover their money. 

Economic conditions across business segment is stressed. Banks are finding it difficult to support but they are forced to do it. They are forced to do CDR.  Its time for every business to go for reality check. Its time to make real P & L A/C & Balance Sheet for SELF USE. (Usually its made for shareholders , lenders & tax authorities  and invariably its misleading). 

Making sense out of own financials is the most sensible thing for every entrepreneurs in today's time.

Thursday, June 27, 2013

Deadly DEBT !

Yes its deadly. 

Inadequate debt wont allow your business to grow and entrepreneurs will suffocate & die. (business will die)

High debt will drown you in the burden of interest. Yes more debt without adequate productive use will eat into your profit. Invest excess debt thoughtlessly and inability to repay will make your account NPA and your otherwise profitable business will also sink. 

No bank /institutions will finance NPA accounts. Inability to raise finance means stagnation.   

Debt is necessary for growth but its adequacy is what matters the most. Many businesses are out of business today just because of either of the two scenario mentioned above. 

Understanding play of -  cashflow , adequate sustainable leverage (debt) , criticality of  margin & contribution , cash conversion cycle  , inadequate working capital , debt trap , fixed and variable cost , current ratio , cashflow to debt ratio etc are very fundamental to every business. 

Even if you do great business, illiteracy of financial implications will undo all your great marketing efforts. 

All entrepreneurs deal with money & work for money but unfortunately many entrepreneurs do not understand money part of the business

Tuesday, May 14, 2013

Is your business making money?

Is your business making money? 

Answer may be NO but you may not KNOW. Yes many businesses are just managing cash flow and not making profit. 

Is it your money that you are splurging on ? 

It may be of your creditors or banks or government. 

Is your networth positive after you writes off dead stock , dead investments , difference between book value and scrap value of your assets and bad debts ? 

Is your ROI more than risk free rate market return ? 

You may have money in bank but do you have assets value more than your liabilities? 

Take a critical look at your MANAGED financials.You may cook the book to fool government and investors but be cautions about your uncooked real books that is fooling you and taking speedily you on the road to bankruptcy.   

Many companies survive before they burst merely on the basis of positive cash-flow. Cash flow is critical but at the same time it misleads. It makes us believe that our business is making money. But unless you are vigilant on the above aspects of profit and loss and Balance Sheet , only positive cash flow dependency can be a disaster.

Friday, January 20, 2012

Are U FANATIC about Customer Experience??

While studying a report on customer experience at one of the UK based banks, I came across the term "bank puts much of its success in recent years down to its
fanatical focus on customer experience (service
) . "

I wonder how many CEOs are FANATIC about the Customer Experience their company creates!! Forget FANATIC, are aware and care about it ?? Its the role of CEO to create WOW!! and Delightful Customer Experience for their all stake holders and more precisely CUSTOMERS.  

Every business is under going challenging phase ( low margins, tough competition, difficult to retain real talent , china threat ) , technology is changing rapidly ( mobile, to tab to smart TV to smart machines, innovative products and execution capabilities ) new ways of of doing business ( online, franchise, outsource, collaborate )  new age entrepreneurs ( young , energetic  with no legacy baggage, ready to challenge convention ) , govt policy paralysis ( slow to No - tax or procedural reforms forget FDI ) , high sales but low cash flow & profitability, fudging of accounts not only to manage shareholders and analysts but also to have elusive sense of self belief.  

In this grave situation only hope for survival is severe Customer Focus & creating Stupendous Customer Experience.  Yes its to the extent of Fanatical about it.

How many business plans talk about this?  How many strategy /board or owners meets have this on agenda? Wonder many businesses today struggle to survive and crying of recession!!! If customer is not your competitive advantage , what else can be??

Tuesday, October 4, 2011

5 Ways to Immunise Your Business from Global Meltdown

Yes, bad news r more of contagious and glorified most of the time. People have habit of glorifying things. However all of us , in governments and institutions are always working to improve the situation & therefore situation may appear to be grave but not as it made out to be:

What MY business should do to remain on tract during these crisis: Some thoughts:

1) Focus on Sales Recovery & Working Capital Management - Cash is Oxygen.

2) Focus on CUSTOMER, Customer Service, Customer Expectations, Customer's own Problems, Meet Customers Often. Customer is Revenue.

3) Do not over trade with low margins , instead roam around , develop new products and new markets, meet vendors and other business associates. They are Blue Ocean enablers.  

4) Invest in technology to quicken the business processes, invest in people to make them more skillful and capable. This will help immensely when situation improves.

5) Believe it or not, use social media to become known, address customer concerns, become known as leaders by creating useful industry related content. This is social currency.


Nothing to worry in our own world. Newspapers and opinions of the so called experts are making us nervous.  Fact is,  no one knows anything. There are always contrarian views for everything. Lead off line of this blog says " there can be multiple views that are true on the same matter at the same time". 

Therefore focus on the above 5 agenda and leave opinion makers, economists  and stock markets aside. Majja-ni Life  { Life is Happy & Beautiful, don't worry be happy & make others happy by our actions & words }.

Sunday, September 18, 2011

Awaken to the Realities of your Balance Sheet

Earlier I wrote about Importance of Profit Vis a Vis Cash-flow. Yes Cash-flow is necessary but not sufficient. However Cash-flow is infact NECESSARY. 

I recently came in touch with a company with an EPS of Rs.100 plus. Yes they have earned huge profit on their equity but they have defaulted on loan repayment consistently for last 6 months. 

Reason: Profit Earned but not en-cashed. Investors usually goes by EPS and PE etc ratios for deciding about investments. How erroneous it cud be???
On the other side entrepreneurs mostly do not feel the realities of the business performance as long as cash flow is flowing in. Test Check - Just remove potential bad debts , dead stock & dead investments from the Net-worth and see the result. Is the Net-worth is  still positive , thank GOD. I mean it. Most entrepreneurs ignore these facts or even do not know this realities as long as they have cash to take care of their own needs. 

Therefore Profit & Cash-flow both MUST go hand in hand and must be closely watched by the entrepreneurs to remain in business for longer. Any one missing or ignored will KILL the business sooner than expected. 


Weak Cashflow will KILL quicker , weak Profit in the long run. 

Awaken to the realities of your Balance Sheet { Today }.

Friday, March 18, 2011

Cash Flow is Necessary but not Sufficient


Many a times Cash Flow is so comforting that entrepreneurs forget about Profit. Its your money that counts at the end of the day. Cash Flow is important and critical but not enough. Its not your money. It is money in the system. May be belongs to banks, creditors or private lenders.

Unless U have profit in the books and cash flow supporting the same, u r in for trouble (Big or small depends). At individual level we have seen the crisis in the US in  2008. Same can happen or is happening with many entrepreneurs who consider present cash flow is their own ownership.  

It is also not necessary that all entrepreneurs are finance savvy (even management savvy) to understand implications of these tricky situations. Earlier it is the better it is.