Supercharged Finance Blog

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What I learnt from nearly going bust

By Andy Burrows

The cold, hard fact

The basic - some would say the obvious – fundamental requirement in keeping a business alive is cash. Not customers, and not profit – you can have both of those things and still have a business failure. Cash is like the lifeblood of a business. That’s why the maxim, “Cash in King” is so true.

Anyone in business should have heard this. But it may still seem confusing to you how you can be profitable and run out of cash and fail. If that’s the case, then you can think more clearly about this by remembering one word...

... timing.

Take a very simple example – I buy a car for £5,000 and sell it for £10,000. There is no question that I have a good customer and I have made a profit. But if I have to pay for the car tomorrow, and I am not going to get money from the customer until next week, then my business will fail if I don’t have £5,000 cash to pay for the car tomorrow.

The brutal fact...

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