Double Your Profit Day #24 Cash Flow Secrets Every Business Owner Should Know!

Welcome back to Double Your Profit. Today we're talking cash flow. I remember my dad saying this like 10 years ago, and it's one of those things where you're like, man, he was right. He would always say like, man, you know, the end of the year, the accountant told me I made a bunch of money and I would look at the checking account and be like, well, what the heck? Like, where did it go? That is cash flow in a nutshell. And the difference between your net profit at the bottom of your P&L, and the cash in your bank is cash flow. There are 3 primary financial reports. So you have a profit and loss, and a profit and loss is your revenue, your costs, and your net profit. So that tells you how much you made in a given time period. The balance sheet is what you owe and what you own. So own would be cash, accounts receivable, maybe you own the building you're in. So what you own, minus what you owe, debt on the fleet, accounts payable, your credit card. Now in between those 2 statements, there's a report called the statement of cash flows and basically tells you what happened. So on my profit and loss, I made $100 net profit on the bottom of it. So the $100 goes to the top of statement of cash flows and said, hey, of that $100 of net, here's what happened. Maybe we had to pay off a little bit of debt and that was on a truck and that was $50. You take the net cash flow and that's up at the top of your balance sheet. In cash. So we went from $100 to $50 through AR, AP, and paying off some long-term debt. That's cash flow, and it's a really important concept to understand because the numbers get bigger the bigger you get. I want to talk a little bit about how to optimize for cash flow. The first thing is track it. You can use the statement of cash flows, and you should be using some type of cash flow What a cash flow template does is it tells you when cash has to leave your bank account. It's really hard to run a profitable business if you don't know what's coming ahead. Really good practice is what's called a rolling 13-week cash flow forecast. And it gave us real clarity around where our cash was going, which in order to stack cash, you need to know what is depleting your cash and then take like real action to reduce that. Second is optimizing your due dates. You can have a cash crunch. So when you're starting to set up terms with vendors or terms with credit cards or, you know, hey, am I doing weekly or biweekly payroll? These are all cash flow decisions that make a really big impact from now until the end of time. So when you get a chance to choose a due date, you want to make sure that it aligns with your cash flow. Some of this simple stuff helps prevent cash flow crisis. So those are 2 really important concepts as you think about cash flow is just timing. The third one, similar to timing, is vendor terms. Hey, do I have 10 days to pay this vendor? Is this COD? Like, do I have to pay it at the time of service that first day? Do I have 30 days? Do I have 60 days? Do I have 90 days? But I do think you need to be thoughtful about the terms that you have with your vendors so that if you're in a crunch, you have the optionality that you need. So number 4, stashing cash. Once you track it, once you optimize when it's leaving, Once you set terms, let's talk about stashing away that cash. Hey, if you're receiving money, you should be automatically saving. We used to have a weekly transfer, now it's daily, and the benefit is it just stacks up forever. You don't really notice it, it just goes away, it hides over here, and then you have a cash cushion. And the reason that tracking your cash matters for this is you know when you can set that cushion, and you set the deadline so you know when in a month you can transfer it. So you have to do those first 2 before doing a really good job here. My fifth and final is increasing cash flow. Increasing cash flow is really this whole series, right? How do we increase our cash flow? So are we calling people and collecting money? Are we cutting expenses? Are we making sure we're not bringing on dumb expenses? Are we maximizing the expenses that we currently have? What are the daily decisions that we are making to maximize our cash flow? There's a big difference between paper profit at the bottom of your P&L. and cash in your bank account, and you wanna make sure that you're moving towards both. If there's any questions you have on cash flow, just drop 'em in the comments below so we can answer 'em. And make sure you like and sub.