[...]... after they sell you their product—money—they want you to give it back! Loans are made in cash, and lenders insist on being repaid in cash A good lender, therefore, must understand what it takes for a business’s cash flow to be adequate to repay debt as scheduled The concern is not just repayment, but repayment as scheduled—that is, on time And there lies the essence of the cashflow rub—timing The bank... better managed in be better managed light of the dynamics of the seven cash in light of the drivers Before we take a closer look at dynamics of the those cash drivers, though, we need to seven cash drivers have a clear sense of the nature and importance of cash flow itself Let me begin by telling you a story Why Cash Flow Is Important L ast gas for 150 miles.” We’ve all seen that sign in movies, a television... first-rate are another matter companies go bankrupt, and the core reason is almost always the same Their managers never learned how to think and plan in cash- flow terms Consequently, they ran out of fuel But like many analogies, this one, too, eventually breaks down Consider the car It burns fuel to run, then it must either refuel from an external source or come to a stop On the other hand, a well-run... accounting legerdemain, cash is still king, Cash Rules! Many large-company managers are learning this basic reality in The stock market pays the same down-and-dirty way as the small far more attention to and midsize firms Here is why To the surprise of many people, smallunderlying cash- flow company owners and their bankers are not realities than it does the only ones who follow cash flow The to reported accounting... financing cash flows and investing cash flows But for the moment, the basic definition will serve One other important issue at this early stage of understanding cash flow is a distinction based on the basic type of accounting system being used |8 Cash Rules Avoiding Distortions Cash versus Accrual There are two basic accounting systems: cash- based and accrual-based In a cash- based accounting system, cash. .. influence the use of other resources that cost dollars At the same time, your actions have a direct or indirect effect on cash coming into the business But what are the key factors that drive that two-way flow? If you can identify those factors in terms of your company’s basic operations, you will gain a powerful tool for growing your business and ensuring that the cash flowing in exceeds the cash flowing... of these cash drivers You may be the owner or president of the company and trying to come to grips with trade-offs among market share, pricing and profitability Or maybe sales management is your area, and you need to think through the terms of a new salesforce compensation plan, one that gives adequate attention to 3 | CHAPTER ONE CASH RULES a new product line that seems to hold great potential for the. .. this point about the self-generation of cash further The main quantitative measure of a business’s success is not profitability the excess of revenue over expense Instead, it is what I call cashflowability the excess of cash flowing into the business over cash flowing out It is quite possible, and even common, for profitable businesses to be cashflow disasters Revenue and expense as the determinants... accounting accounting measures the flow of value to understand But the flow of cash and the flow of value what happened in are quite different in several material cash terms respects It is crucial, therefore, to get behind the details of accrual accounting to understand what happened in cash terms Cash Flow & Credit Bankers usually understand cash flow better than anyone else The reason is simple Bankers... those talented people somehow were absent the day the teacher covered cash flow Cash Is King Y ou might think that most of these observations apply to smaller companies that live close to the edge the kinds of companies for whom survival is a crucial issue, if not the main event While there is some degree of validity to that 7 | CHAPTER ONE CASH RULES view, the real question has to do not with company . kiplinger’s business management library bill mcguinness bill m cguinness learn & manage the 7 cash - flow drivers for your company ’ s success learn & manage the 7 cash - flow drivers for your company ’ s. Together Chapter 13 : Cash Drivers & Strategic Thinking 18 5 Cash- Driver Harmony • Cash Drivers & Competitive Advantage • Cash Drivers & Export Potential Chapter 14 : Risk, Return & Valuing Cash. THREE: Cash Flow & Business Management 16 1 Chapter 12 : The Mechanics of Cash- Driver Shaping & Projections 16 3 Shaping the Cash Drivers • Projecting Future Cash Flows • Putting It All Together Chapter