Friday, March 29, 2024

Beyond lack of money, cash deployment decisions kill most small businesses

In the world of money and wealth, many people are unable to discern the difference between cash flow, riches and wealth. Most people confuse more cash flow in their daily lives for wealth and proceed to behave as if they have crossed the line of poverty forever.
Psychologists put it that we become what we have experienced in our past life, which implies that a new you must be born of new behaviors free of you if you were to experience a meaningful difference. Most young people start with misconceived world view of money acquired from the language and real life modeling by important others. Our children learn from what we do rather what we tell them or would like them to do, and so they form their ideas of money from what we say and do with money.

In a society pumps up the image of living well to mean financial wellness, when it is not and will never be, children have mixed ideas about money. Society level behaviors has for example pushed the flashy things such as owning a big home, expensive cars, and other flashy spending as a way displaying the purported wealth status whether or not the cash flow is permanent or discontinuous. For example, a tenderpreneur can be in big money for five years, then dry up to nil, having lived big in that short season
The process of acquiring the world view is personal and is developed in the ordinary course of our relationship with parents, peers and important others. Incidentally, it cannot be previewed until the young star is exposed to handling money.

For a young entrepreneur, the main problem is not just money, but also the quality of decisions they take with the money at hand. A small business is not a large business squeezed into a smaller size. A small business is unique. It is facing its equally unique challenges in the environment where it is being steered to acquire and maintain a competitive edge.

During the growth face of the business decisions are critical, especially decision that allocate money to expansion of its operating capacity. Many small business die when thing s change for the better because of poor decisions that for example take away cash required to bring in stocks and create debtors into the expansion of machinery, making the business unable to meet client orders.

Cash flow is defined as streams of cash coming in as income and going out as expenses. Controlling your cash flow therefore mean that you first take control of the sources of your income before you take control of where you spend it.

For a small business owner, this may mean considering other business ideas before considering large spending on a home in a key address or that dream car. Better still the choice between expanding capacity and keeping customers current orders satisfied.
When cash flow management is the problem, growth can be poison, and has indeed killed many small businesses. Acquiring financial literacy to see the difference between assets and liabilities, capital assets and working investment and to improve the quality of your decisions regarding money deployment in business operations is critical for business growth.

Many small businesses have been strangled to death by their owners who divert cash flow from their businesses to acquire their desires too soon. Incidentally bankers do not provide charity and would be the least helpful people to approach for help when you have committed such a social offense. To be a winner. Control your emotions to control your cash flow.

Article by: Patrick Wameyo

Patrick Wameyo is Financial Literacy Coach and small business financial consultant.
Financial Academy & Technologies is a unique academy that train adults to manage their money better to create wealth. The Academy runs monthly workshops on financial management for small business owners focusing in managing finances in growing businesses. For comments email: [email protected]

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