It's Not as Hard as it SoundsWritten by Dave Balch
Are you on road to success with your business? Are you sure??? One of best tools to find out where you're going is a cash flow; have you done one yet? If not, you should. Keep reading; it's not that complicated!
A cash flow may sound intimidating but it doesn't have to be. It is a way to see out how much money you'll be spending and how much money you'll be receiving, and when. You'll see when your expenses will exceed your income and vice versa; it is a plan!
A simple cash flow is just a chart with rows and columns. Label columns "January", "February", etc. Down side show each item of income and expense. Then place amount of that income or expense in column for month that money will actually be received or spent. The idea is to see how much cash is flowing in and out for each month. (Remember to show expenses as negative numbers and income as positive numbers.)
For example, you plan to set up your office in January, get a mailing list, order inventory, design brochures in February, and do a mailing in March. Make separate lines for each expense: computer, furniture, fax, etc. If you finance anything, show payment(s) for each month they are paid. Now marketing expenses: printing, envelopes, postage, etc. You may order inventory in January, charge it in February, and pay it in March; put payment in March column. Get idea? If mailing is going out in March, you may expect some sales in April. Estimate them and put income into April column. Total each column to see what net cash flow is for that month.
For example, January, February, and March will have expenses and no income (negative cash flow). April will have expenses and income; if income is more than expenses, congratulations! You have positive cash flow!
It's Not a River in EgyptWritten by Dave Balch
I admit it. I've made some mistakes. Oh, sure, I talk about all of things that went right and that I did pretty well with my home-based business, and that's true. But I would be doing both of us a disservice if I were to leave you with impression that all is well in "Home-based Business Land", that I live in a carefree fairytale world of wealth and consumption, and that my bills are all paid and will continue to be. No, it's not like that at all. And it's only just recently that I identified problem. It can be summed-up in a single word: denial.
My business is centered around software that is dependent on a technology that is slowly going away. I had a nice income stream (customers pay an annual fee), but as my customers drifted to new technologies my base of income eroded. I could see it happening. For years I said "This gravy train isn't going to last forever!" I chose to ignore it. Why? Denial. Although I wasn't consciously aware of it, I took attitude, "I'll worry about it when it happens." Suddenly revenue is alarmingly low, and now I have to deal with it. Had I dealt with it sooner, it would have been much easier to fix.
A friend of mine recently went to New Zealand on a speaking tour. She agreed to pay her own airfare and organizer ('Peter') would pay for hotels and for her speaking appearances, plus she would be able to sell her books and tapes at seminars. It was not until after she arrived that Peter informed her that most of seminars had been cancelled. After she arrived! He knew that participation was going to be low. He knew that they might have to cancel. He didn't tell her, though, because he was in complete denial.