Why Understanding Cash Flow Is Crucial in Crisis
At the core of the Entrepreneurs' Organization (EO)'s mission is an enduring commitment to engaging business owners at every stage with the tools, education and community necessary to learn and grow. In times of crisis and change, entrepreneurs lead, adapt and endure. To encourage effective leadership during the Covid-19 crisis, EO launched its Virtual Speaker Tour series, featuring thought-leaders sharing expertise with the EO community on topics relevant to business survival and leadership in crisis.
In a recent webinar, Alan Miltz, co-founder of Cash Flow Story, shared his expertise around the importance of cash flow during the crisis. Amanda Ma, founder of Innovate Marketing Group and EO Los Angeles member, found the webinar extremely helpful and shared this summary.
"Revenue is vanity. Profit is sanity. Cash is king."
That's accounting guru Alan Miltz's mantra, and during Covid-19, it's worth repeating--especially the last part.
"At the moment, it's all about cash," Miltz told a group of EO members during a recent Virtual Speaker Tour webinar. "I've been getting calls by the hour from company leaders around the world who are almost in tears. We are now operating in different times."
Job one for entrepreneurs is to dig deeper into their financials and make sure they understand an often misunderstood concept: cash flow. There's a big difference between cash flow and profit. Most young business owners understand profit, but few can describe their company's cash flow to a banker.
And many are going to need to do precisely that as they scramble for loans to stay afloat until the Covid-19 crisis wanes. Banks want to know if borrowers will be able to pay back loans, and the indicator they look at isn't sales or profit.