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• Article:  The Seeds of Tomorrow's Cash Crisis Are Being Sown Today
• Coach's Corner:  That's My Story 
• Tip of the Month: January is an Ideal Time...

The Seeds of Tomorrow's Cash Crisis Are Being Sown Today

Business owners often get trapped because they don't heed the messages their business sends and they don't pay attention to basic principles. The following checklist represents a clear set of danger signals - situations and issues - that have a clear and negative effect on cash flow.  Take a few minutes under the harsh, cold light of reality to ask yourself how many of the following danger signals exist in your business and then evaluate carefully their implications: 

• No physical inventory taken on a regular basis.
• Lots of unsold inventory sitting around.
• No monthly cash budget projection.
• Bank credit line not paid down to zero within the last year.
• Term loan payments were paid late one or more times within the year.
• Buying at trade shows without a purchasing plan.
• Short-term credit like credit lines used for long term assets such as rental equipment.
• Bank statements not reconciled every month.
• Supplier discounts rarely taken for early payment.
• Projected annual sales increase of over 25%.
• Balance sheet prepared only at the end of the year, and only used for tax purposes.
• No review of financial statements on a regular basis.
• High interest rates on bank loans.
• Increasing amount of credit supplied by credit cards.
• Bad debt expense increases every year.
• No Accounts Receivable report on weekly basis.
• High moving items are often out.
• Payroll checks have been written late one or more times this year.
• No systems in place to prevent internal fraud.
• Only communication with CPA is in April to discuss tax avoidance strategies.
• No handle on company cost structure or break even level.
• Showing profits but no cash.
• Business cycle contains sharp seasonal slumps or booms.

Perhaps the greatest danger of all:  not having adequate records and/or financial skills to be able to answer all of these questions - or not having any questions to ask! Planning is the vital element, especially when we're talking about cash flow.  Danger signals are just that - signals.  The longer you wait, the fewer options you will have.  Now is the time to gain control and keep it.  Get yourself ahead of the game, sleep better at night, and get in a much better position to weather whatever rough seas lie ahead. 

See Tip of the Month for resources to help build a cash budget for the year

I read this story by personal coach Drew Rozell a couple of months ago and it's still resonating with me.  I hope you enjoy it, too. Learn more about Drew by visiting his Web site at http://www.evolutioncoaching.com.   While there, be sure to sign up for his terrific ezine "The Drewsletter".

That's My Story...

I sat on the couch next to my father.

"So how long will you be home?" he asked.

"Two weeks, remember?" I replied.

"Two weeks. Right. And then what? Do you have any plans for the future? Any job prospects on the horizon to get some money coming in?" he asked.

I detected the tone in his voice - it was oh-so-subtle. But it landed in my stomach immediately. And I reacted. continued

Visit our Tool Kit area http://www.brs-seattle.com/toolkit.html to download our free template (look for the Excel file called Profit Plan and Cash Flow Projection.xls), or try out our FIT software at http://www.brs-seattle.com/homefit.html.

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