TERRA FIRMA FINANCIAL MANAGEMENT
I want to share what I have been thinking about for some time now. As a business owner you have a bookkeeper (accountant) to manage the cash in and out of your business. Financial management is so key in a business striving for success.
You have heard the saying “Cash is King”, right? But I think that isn’t the right way to view it. We should be saying the “Flow of Cash is King”. Here is why.
Have you ever been on a walk and come across water that has pooled, it could be big or small? After a while this pooled water begins to grow algae, begins to smell, and bugs begin to congregate around it. Gross huh.
Well when that same pooled water has additional water from outside of the pooled water being to flow into it, what happens to the algae, smell, and bugs? They go away.
Cash does the same thing just as the pooled water sits there stagnant. Cash doing nothing is unproductive. Here is the problem, most people automatically think that this money needs to be invested in the stock market or someplace where there is potential risk. Not necessarily.
We’ll get back to this point in another blog.
At the start I began speaking of using a bookkeeper to manage this flow of cash. This way you, as the business owner, can make productive decisions of the cash and where to place it so it can work harder for you just as you work hard for it.
Think about all the time and effort that goes into getting cash flow. Simplified, you have marketing costs and time, proposals and presentations to clients, time spent providing widgets or services then you get the client and you have cash flow.
Think about this for a minute. You have a bookkeeper to manage your cash flow in your business but then you go home and manage all your personal cash flow. Meaning when you get paid that income or profits are sent to your personal bank account for your personal use. Then you pay the bills and decide where to save the extra “discretionary” cash or spend the left over.
Does that make sense?
What would happen to your personal finances if you had a bookkeeper manage your personal cash flow so you can clearly see where the money is going in and out personally just like your business.
I see all the time business owners not running their personal finances like a business. The response could be why not you worked so hard for it. I made that same comment earlier. Here is why, you are potentially paying the highest taxes on it called income tax.
This is what the IRS wants you to do. But the question you should be asked is that what you want to do?
Shouldn’t you focus on managing your personal flow of cash like a second business?
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