Never Let Your ‘Cash’ River Run Dry!
It is often said that “Cash Is King” but if that is true then surely “Cash flow Is Queen”!
Cash flow is the lifeblood of any business and allows the enterprise to survive long enough to reap larger rewards, whether that is when the business is sold or when larger revenues come in. Ignore your Cash flow, or income, at your peril! It is essential to survival.
Focus on Cash flow and income first and foremost and the rest will look after itself.
Borrowing in the form of overdrafts or mortgages is fine but in my opinion it is essential to recognise that these loans need to be paid back eventually. They are not income and should never be treated as such.
It is fine to borrow money to make money (within reason) but you should never borrow to improve your lifestyle. That in my opinion should be done from money earned and saved.
Two exceptions are homes and cars, or any other form of personal transport. These are usually big ticket items and need proper financial planning.
Of course properly planned borrowing in the form of mortgages is fine, providing you are sure you can make the payments, but using things like short term overdrafts and credit cards as long term debt provision is a recipe for disaster.
In my opinion the government should introduce legislation preventing over 25% of any surplus equity in someone’s home, after the primary mortgage, being used as collateral for anything, including business purchase.
The property business is one of the worst Cash flow business models out there which is why I have always developed other interests to run alongside my property business.
Property is bounced around by governments and political agendas, so you can never be absolutely sure that legislation, which was active when a purchase was made, will still be in force when a selling decision needs making, often many years later.
House building particularly takes time. You firstly have to buy the land and then go through the long and very expensive process of drawing up plans and submitting them to the planning department of the local council, who may or may not agree with the proposal.
All of this costs many thousands of pounds, often borrowed pounds! and is subject to continual delays.
Often property developers put their homes and families at risk in a bid to achieve something they believe in and make a profit. Without these risk takers many houses would not get built at all so they deserve their reward.
As I say, keep a close eye on your Cash flow and make sure all outstanding invoices are monitored and collected on time.
Big business has been pretty poor at paying small contractors in the past but most do pay in the end.
Factually, social media has made it more difficult for some of the culprits to avoid their obligations through fear of being exposed on Twitter or Facebook.
Social media has created emancipation of small businesses and voters alike by giving them a voice they never had.
Always take detailed professional advice before signing loan or other binding documents, no matter how keen you are to get the facility or agreement in place.