A review of bankrupt companies revealed that more than half the business failures occurred with firms that were producing operating profits. The firms went under because they looked only at their profit-loss statement and forgot about cash flow and managing debt. No matter how well sales are running, you can still lose money and possibly your business.

MANAGING FINANCES EFFICIENTLY

To keep up with the economy you must keep close tabs on your assets, liabilities, and net worth. Assets are what you own; liabilities are what you owe; and net worth is what's left over. Improving the efficiency of converting assets to sales revenues involves how you pay for assets and if you can get your hands on cash to survive. Too often this part of the financial cycle is ignored by contractors. To manage this part of the financial cycle better, you can concentrate on three areas: inventory management; receivables management; and structuring of debt.

MANAGING INVENTORY TURNOVER

If you keep an inventory of a product, you can decrease its turnover time. This squeezes cash from the balance sheet.

MANAGING ACCOUNTS RECEIVABLE TURNOVER

Similarly, by managing your accounts receivable turnover, you also can squeeze cash from your balance sheet.

RESTRUCTURING DEBT

You can not only find hidden cash in your balance sheet, you can restructure your debt to make your business more solvent or to make it grow faster.