Cash Flow Causes Your Business’s Biggest Failure

Cash Flow is often a major problem for businesses, but most business people never realize it or pay less attention to it. Top Coach Indonesia’s research shows that on average 8 out of 10 business people tend to only pay attention to profits rather than cash flow, and maybe you are one of them too?

Even though there are so many business sad stories that tell of business failures because of ignoring cash flow, even in fact many businesses are in a profitable condition but are forced to close just because there is no cash or lack of cash to support the business. The problem is simple as that!

Friends of entrepreneurs, what insight can we take from the above circumstances? Profit does not equal to Cash! (profit ≠ cash). Cash is needed by businesses for daily operations and not profit.

If you keep wondering, without intending to scare, here we have summarized some statistical facts why you shouldn’t play around with how to manage your company’s cash flow:

1. CB Insights: “ran out of cash” is the main reason why start-up businesses fail.

CB Insights, a leading research institute in the USA published on CNBC.com [1] examined all the problems faced by companies that failed and asked the company’s business owners to rank 20 problems that caused them to fail in doing business. The results of CB Insights’s research found a surprising fact that “ran out of cash” ranked second out of 20 main reasons why their business failed.

2. Dragon’s Den CBC News: cash flow is the biggest challenge in the MSME business.

Dragon’s Den is a reality show about entrepreneurial that is very popular because it presents a real business situation with various facts that are displayed bluntly. In the Dragon’s Den chat on October 19, 2011 published in CBC News [1], on that occasion one of the questions asked to thousands of business people who participated was what was your biggest challenge in trying?

The conclusion from these business people shows that cash flow is the biggest business challenge they face (51%), followed by Marketing (21%), then Managing Staff (10%) and the last challenge is Work-leisure / Family (18% ).

3. Simply Cash Flow Limited: 51% of MSME businesses say that cash flow is the biggest challenge of their business and the failure of MSMEs in businesses caused by cash flow reaches 80%

The results of a compilation of various studies around MSMEs in various countries presented by simplycashflow.com (the leading business management blog in the UK) show that cash flow is the biggest business challenge in various countries namely Canada (51%), Ireland (32%), UK (41%) and USA (28%). The research compilation also concluded that 80% of MSMEs in the UK failed due to cash flow problems, New Zealand 66%, and 61% of Australian MSMEs failed due to cash flow issues.

4. US Bank Study, 82% of businesses fail due to lack of cash management.

A study conducted by Jessie Hagen from U.S. The bank, by studying business failures from the NPL (non-performing loan) aspects experienced by so many business people in various sectors, found 12 main reasons why businesses failed and the biggest contributor to these failures came from poor cash flow management, which amounted to 82%.

5. Top Coach Indonesia Study: 80-90% of MSMEs fail in Indonesia due to cash flow problems.

A study conducted by Top Coach Indonesia based on the observation of Top Coach Indonesia’s experience for 5 years and supported by secondary research indicates that 80-90% of MSMEs fail in Indonesia due to cash flow problems.

By having an understanding of the facts about cash flow above, it is very important for business people to take time to pay attention to the company’s cash flow, manage cash flow, and immediately take corrective actions as early as possible to deal with the existing cash flow problems, after all, isn’t cash flow is the company’s blood flow? So pay attention to your company’s cash flow so that your company can grow and develop healthily.

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