Kennedy Cromwell Associates

"Providing practical solutions to financial problems."

It’s all about Cash Flow

 

What is cash flow?

Cash flow is the most talked about, least understood concept in finance. There are tables, charts, flowcharts, reports, books, courses and every other imaginable thing to try to explain it. We say cash flow is defined as having more or less money available at the end of the period than at the beginning. If there’s more cash at the end than when you started you have positive cash flow, if you have less then you have negative cash flow. Positive is good. Negative is bad.

Why do we care about cash flow?

A positive cash flow means more opportunity. A negative cash flow means taking out loans or selling part of your stake in your business. Simply, when you have positive cash flow the question, “What would you do with a million bucks?” is not academic. It’s real. The dreams of what you can do with a million bucks become your reality.

Which dreams of yours have never become reality because you didn’t have the money? Ideas without cash will always remain just that, good ideas. Ideas with cash become real. No one I know has ever gotten any joy from an unfinished dream. In fact, the most frustrated, dissatisfied people I know are the people whose dreams remain unrealized. Cash flow makes dreams come true.

Isn’t the best way to get money from an investor?

Sometimes, yes. Most often, the cash required for most people and businesses is right under their nose. Even the most indebted people I’ve met, using the “Step Down Your Debt” method can have positive cash flow. Devoting your efforts to improving your own cash flow will bring investors to you. Investors do not invest their money with people who make fifty cents from a dollar. They invest in people who make a dollar from fifty cents.

Why are you so obsessed with cash flow?

The people and businesses that have the fullest lives are those with positive cash flow. Those people who have more money each and every month are less stressed. They spend their time thinking of new ways to use their time and money. They devote no energy to ducking creditors and living in fear of the landlord or mortgage company. Their lives are more fulfilled.

But I don’t need any more money.

Really? I can’t think of a single person I’ve ever met that didn’t have some dream that couldn’t be realized with more money. The dreams range from early retirement, fancier clothes, nicer gifts for the kids or grandchildren, a substantial donation to a school, church or other charity. Money is certainly not the answer to life, but having it permits you to do more with the time you have.