The Business Edge Blog

March 23, 2011

Beware – Cash is King, but not Everything!

  Cash is King, but not Everything!

As small business owners many of my clients measure the health of their business by their bank balance.    If there is money in the bank, life is good.  Your corporate tax returns are filed by now, or you have requested an extension. Personal tax returns are due soon unless you request an extension.  You have looked at more paper than you care to in preparation for your tax returns.  

So, what can you learn from all that paperwork beyond knowing how much you owe or paid  in taxes?  Can you chart your actual expenses to see a cycle of cash flow for your business?  Are there annual expenses that you should be accumulating cash for all year long so they aren’t such a shock when the bill arrives?  Can you plan for expenses and contingencies so that 2011 is a smoother year financially than last year was? 

Before the year gets too far along and you put all those tax preparation papers in deep storage, take a few minutes and create a 2011 outgoing cash flow analysis for expenses – sounds hairy, but don’t let it stress you out – using a simple spreadsheet.  Set up a 13 column format with the first column being a description column.  Label the next 12 columns one per month, January, February, March…you get the picture. 

What expenses did you have each month in 2010 that will occur again in 2011?  Put a description in the first column so you’ll be able to identify what the expense is.  Put your best estimate for the 2011 amounts in the same month(s) column in your spreadsheet.  Rent, Internet and Phone expenses will probably appear in each of the 12 month columns.  Insurance expenses and membership dues may occur in one month’s column, or twice a year.  Repeat for each expense that you can identify from your 2010 paperwork.

When you have everything entered in the 2011 spreadsheet that you can identify, create a total at the bottom of each month column adding up all the expenses for that month.   Next create a total of all the totals for each month, giving you a Grand Total. 

You have just defined as closely as you can your Break Even Point for 2011!  

The number is probably a big one.  What does it mean?  It means that based on the information you entered into the spreadsheet, it will take that Grand Total amount to cover all the expenses you identified for 2011.  You won’t start to build value in your business or make a profit until you bring in at least the amount of these expenses into your business.  The big balance in the check book can be measured against the expenses listed in the upcoming months so that you aren’t tempted to spend it and then be short when the big bills come in.  Keep the bank balance growing until it covers all the expenses you can see ahead of you.

Need help in developing a strategy to increase your business so that there is more left over for you in 2011?  Give me a call.  815-985-3652  We’ll talk.



  1. Holly I am excited about your Good Morning Rockford, Maureen and I both are planning to attend. Do you mind if I applaud when your done speaking.


    Comment by Steve Solverson — April 5, 2011 @ 6:49 am | Reply

    • Glad to know that you and Maureen will be there! It’s always nice to see a friendly face in the audience. See you at Breakfast Buzz! And yes, you can applaud whenver you feel so inclinded. Hope you enjoy the session!

      Comment by bizcoachholly — April 5, 2011 @ 6:57 am | Reply

  2. Good idea on how to start determining what I need to keep going. Any suggestions on how to improve cash flow? Receivables are nice but I can’t spend them until their paid.


    Comment by helpfulherb — April 19, 2011 @ 6:53 am | Reply

    • Interesting question Ron (Helpful Herb). Please see my next blog that answers your questions.

      Comment by bizcoachholly — April 19, 2011 @ 7:27 am | Reply

  3. Great blog. Sometimes the obvious is the hardest to see!

    Comment by Mike Bayer — April 19, 2011 @ 7:01 am | Reply

    • Thanks Mike – Appreciate your comment. Sometimes it’s that we can’t see the forest for the trees. A review of basics is not a bad idea for all of us occasionally.

      Best of luck as you grow your business!

      Comment by bizcoachholly — April 19, 2011 @ 7:14 am | Reply

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