Insights on Robert Kiyosaki’s Guide to Investing – Chapter 32

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After learning the three elements of the B-I triangle which is essential to have in a business.The succeeding chapters would now discuss the five building blocks that hold the three elements of a business. The first one to be discussed on this chapter would be “Cash Flow Management”.

Every business enterprise throughout its life would encounter customers who would pay or promise to pay in the future for the services rendered or products sold, but every enterprise would also experience losses through bad debts from these kinds of customers. Which is why the first building block discussed was about cash flow management.

Having a lot of sales or revenues from customers is a good indication of profitability but it does translate into success for most businesses because if you look at their liquidity, they are always running short on cash. Cash is said to be the lifeblood of the business because without it, the business would have a hard time to operate its functions. There is no logic on having a good net income when in fact, all the reported income are just paper income.

Cash flow management is essential in every business for it to become successful because without cash, your team could leave you for failing to provide their salaries and allowances in time. You could also lose your business’s potential if you lost your thorough communication with your client for failing to pay the monthly telephone and internet dues.

Being short on cash is like the body being short on air. You would feel your lungs contract and your body paralyzed. The same thing happens to a business that fails to have a good cash flow management. The business would end up stopping all operational functions because every operational move would entail cash outflows.

There are a lot of ways on how to manage cash flows, saying no to a customer who wants to buy on credit would really be a burden because that customer might become your regular or bulk customer. You just have to make sure that the credit terms would not result to cash flow mishap and demise. A sale and is a sale but you should always prefer it on cash. Might as well, set a credit limit to all your customers based on their ability to pay. I have not much to say on this topic as this is very elementary to me being an accountant, but if you have questions, feel free to ask and comment it below.

NOTE: IF YOU MISSED THE EARLIER CHAPTERS HERE ARE THE LINKS:
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