I was talking with a business coach recently about a her client facing a cash flow crunch.
The problem? Customers owed the company a significant amount of money, but the cash wasn’t coming in fast enough.
It got me thinking about how often we see this in business.
Sometimes, the warning signs have been there for months. Invoices aren’t going out on time. Customers are slow to pay. Accounts receivable keeps growing.
But everyone is busy running the business, so nobody stops to ask why.
Then one day, payroll is coming due, bills need to be paid, and the cash isn’t there.
What if we could see the crisis coming before it became a crisis?
That’s where KPIs (Key Performance Indicators) come in.
A few numbers can tell us a lot:
How long does it take us to collect our money?
Are sales tracking with our budget?
Do we have enough assets to cover our liabilities?
The key isn’t just knowing the numbers. It’s looking at them regularly and being willing to act when something doesn’t look right.
After all, you can be profitable on paper and still run out of cash.
At Fulling Management & Accounting, we want business owners to do more than look in the rearview mirror at what happened last month. We want them looking through the windshield at what’s coming next.
Because the goal isn’t just to survive the next crisis. It’s to recognize the warning signs early enough to do something about them.