Money is Time

There is an old axiom that "Time is Money." This is certainly true in businesses that sell labor. A consultant that is not on billing takes a bite out of the bottom line for every idle hour. The statement is also relevant when evaluating the opportunity cost of focusing one's attention on activities with a low probability of enhancing profitability e.g. that 15 minute break playing minesweeper.

Another important truism is found by reversing the terms i.e. "Money is Time." Money, in this case, is your cash reserves. Like an hour glass, the sand slipping to the bottom is a metaphor for the rate at which your business is using cash. A small business probably has a smaller hourglass than a large company and hopefully the sand falls slower. But no matter, the result is the same. Once the sand passes to the bottom, time is up! You are out of business.

Proper respect for the importance of cash in your business should encourage certain management practices.

First, be aware and make your team painfully aware of your cash situation. Emphasize "cash profits." Making a bottom line by amortizing equipment purchases masks the fact that the business is burning cash. Among your other management tools should be a daily cash balance and cash use forecast. Be phobic about this report; rant as the balance goes down and cheer when it rises. These antics will encourage a valuable miserliness within the management team.

Second, set your spending priorities appropriately. If cash is the gas in the tank that fuels your company along its way then you don't waste gas on low priority objectives. Give preference to operational growth e.g. three sales reps versus an office redo. Spend on programs that are working in favor of those with problems. Fund programs with near term payoff in favor of sunshine on the horizon.

Don't run out of time!
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If you want to develop, diversify or divest your business contact us for a confidential discussion.

716 Figueroa Street
Folsom CA 95630

PHONE 916-985-4445
FAX 916-985-3557

Sacramento Business and Professional Network