Are your cash-flow tools recession ready?

In good times like those most businesses have enjoyed for the past decade, business owners have typically watched their income statements with pleasure, as year-to-year performance gains have fattened their dividend payouts and increased the valuation of the companies they own and run. All too often in such times, scant attention is paid to what’s between the top line and the bottom line of the income statement. Worse, most business owners, in my experience, give little more than a cursory nod to the balance sheet. Why does this matter? When a recession lands on their doorstep with a sudden thud, as it apparently just has, many of these same people will find themselves having sailed too close to the wind, with cash running out and a dearth of tools to help them weather the storm and understand what has gone wrong. But it need not be so, for there are four simple tools to help any business owner answer these four important questions: (1) Where is cash going in my business, and where is it coming from? (2) To what extent are my profit margins improving or declining, and why? (3) To what extent am I effectively managing the cash-flow relationships with my customers and my suppliers? (4) What, if anything, can I do to better manage the cash that flows into and out of my business? If your business is threatened by the COVID-19 pandemic, here are some tools to help it survive.