I took this picture yesterday evening, not very often that I get to see the sky this red.
Happy Cash Flow made me think of one of my friends, her exact word, “Why use your own money when you could use someone else?” I told her then that I’m not disciplined enough to buy on credit on the necessity items, and afraid that this would really get me in trouble. I have credit card for big item purchases such as in store or online purchase of lens, camera or plane tickets. As for some that are more disciplined, they’d use credit card to buy their everyday necessities, to me this could be a good or bad thing, good if you could pay it off monthly so that you won’t get hit with the interest, and bad if all you could make is the minimum payment, using other people’s money could also mean that you’re digging a hole, the money pit that is.
Cash is the most powerful asset any of us could have and most of us can’t deny the fact, whether in personal or business sense and there are many ways to get it, some are wiser than others. As we all know that not everyone makes and capable of making the same amount of money, one person might be a cash-generating machine and another could be a cash consuming vacuum, somehow these go together hand in hand, a person that makes a lot of money often have a high maintenance husband or wife, makes you wonder sometimes.
When I was in Laos, we spent the Kips currency, first time in my life that I was a millionaire overnight, of course it’s nothing to brag about because 1 million Kips is only about $118 US Dollar. I can’t say that I had a lot to spend, my dad and I were traveling on a shoestring budget and we managed to stay within our budget. I like the idea of spending only what you have and have been applying this principle to my daily life, and living a simpler life these days.
Cash flow in a business sense takes on a more powerful meaning, it gives you flexible and strength. Cash gives you the flexibility to act when new opportunity arise as most industries change rapidly and cash gives you the ability to flow with the change and not get stuck. As for strength, it lets you withstand market fluctuations, many that are short in cash are going under as we’re speaking, some of you might know what I’m talking about if you’re starting a new business and get stuck because of your limited resource in the cash capital. Have you ever wondered how the big boys dogs make it big, like really big? I was shocked to learn that some make their own terms, I’ll give an example of this company, but won’t mention their name here because I don’t want my blog to get suspended again. The key is to use other people’s money.
If you look at this company, the inventory you see on their shelves doesn’t really belong to them. The inventory is handled on a consignment basis, with 4500 stores in the US, they’ve lots of vendors that supply them. Assuming that I’m selling my frozen Spring Roll to them. They will ask me to tell them how many boxes of Spring Roll will sell in each location. I’m responsible for coordinating shipments to make sure my Spring Roll get in their distribution centers and then on to the stores. I might even end up stocking the shelves for them. If my Spring Roll sells, then they pay me in 60+ days. If it doesn’t sell within certain number of days, then they’ll put a smiley yellow face roll back of saving, and guess who is paying for that, I am. If it doesn’t sell after that, then the company sends it back to me, and charges me a penalty for taking up shelf/freezer space, and of course I don’t get paid for my Spring Roll, this is essentially a consignment situation. This is how they make it big, buying and selling on their own terms, I do have to say that this is one of the most loved, hated American stores.
Happy Cash Flow is the key to any successful business or even real life living. It doesn’t take a genius to manage a successful company, but it does take someone who knows how to run a business and knows the simple principles of happy cash flow. The most important is to use other people’s money, in other words make sure to pay your payables late, keep inventory low, and get your money from your customers as fast as possible. Second is to cut the number of days that your money is tied up unnecessarily in receivables and inventory and increase the number of days you hold on to your money in the form of payables. Third is to pump up the volume, the more transactions you run through your business, the better. And lastly, put a little in and get a lot out. This is to increase your profit margins by selling at the maximum price and spending as little as possible to create your product or service.
This seems so vigilant, but it’s the dog eat dog world that we’re living in and to stay afloat, you’ve to know how to flow your cash.