Audio podcast: A vision for growing your company needs to include managing cash flow

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Chris Bjorklund: Hello, I’m Chris Bjorklund for the Business Resource Center. Today, I’m talking to accounting and financial consultant Philip Campbell. He is the author of the book “Never Run Out of Cash: The Ten Cash Flow Rules You Can’t Afford to Ignore.” Philip, when an entrepreneur is trying to grow a company, he or she can get super focused on getting new customers, making sure they take care of those customers, and generally they zero in on the selling and operations side of the business. Why is it so important that they also make sure that they have the accounting and financial side of their business under control?

Philip Campbell: Well, what I find really exciting about entrepreneurs and working with entrepreneurs and business owners that have a vision for growing a company is they’re smart. They know what it takes to go out and get customers. They know what it takes to hang on to customers, create an operational system within their companies so that they’re taking good care of those customers but what happens over time is that they get really focused in that area that’s part of their unique ability. Generally speaking, they have a tendency to kind of not totally ignore but partially ignore the accounting and financial side of the business and what happens is that they start to grow. They get to the 10, 20, 30, 40 million in annual revenues kind of point then they realize that hey, maybe the economy gets tough or the competition begins to catch up with them and they realize that hey, I’ve got to have the information because I got to start focusing myself on profitability and growing profitability. I got to focus myself on growing cash flow because I’ve got a bigger operation now; I have more management and executives on the team. I’ve got to make sure that I’ve got the real information because in the earlier days, they kind of got used to flying by the seat of their pants but as the organization gets bigger, it’s more complex, there’s more people then they realize that hey, this thing is about making money. This thing is about cash flow and the faster they’re growing their company, the more pressure that they put on cash flow. And in addition, what oftentimes happen is as the company gets a little bit bigger, it gets to that 40, 50 million in revenues point, they realize they’ve got to go back out to the financial community to raise capital so that they can grow and when they do that and they go to a bank or a lender or they go to potential investors, they know that they’ve got to go to them with a financial package that creates confidence in the minds of those lenders. They’ve got to create credibility and if they’ve got an accounting and financial side of the company that just produces shoddy financials and doesn’t really know what’s going on financially, what they find out real quick is that they have a hard time getting the capital that they need. So a lot of this is about a lot of what I coach and teach and help implement for entrepreneurs is that getting their accounting and financial side of the house in order is an important part of creating confidence in the financial community because you’re going to need the financial community and investors and lenders in order to help you grow your company successfully into the future.

Chris: I would think there is eventually as you say, a sort of a day of reckoning where as you pointed out, the flying by the seat of the pants isn’t going to work especially when you’re, as you say, trying to get a big loan to further grow your business.

Philip: Right, exactly. Usually what happens is that either they run into a cash flow problem and that’s really easy to do because they could have a good solid profitable business that they’re growing. Growth puts a big strain on cash and so oftentimes, they run themselves into a cash flow problem then they realize, hey, I don’t have the information I need to figure out what’s going on and I don’t have the information I need to take to the bankers and the lenders who can help me address the cash flow issue.

Chris: We’ll be talking more about this in another podcast. Thanks so much, Philip. I enjoyed talking to you.

Philip: It was my pleasure.

Chris: You’ve been listening to Philip Campbell. You can find him at www.neverrunoutofcash.com. The Business Resource Center is a free resource for all businesses made possible by the Business Bank of Texas. I’m Chris Bjorklund, thanks for listening.