March '20

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102 • RV PRO • March 2020 rv-pro.com RV I N S I G H T Cash Flow: A Company's Life Blood Properly managing cash flow can make all of the difference as to whether an RV business succeeds or fails. Cash flow is the life blood of every business. In fact, according to a recent U.S. Bank study, poor cash-flow management causes 82 percent of U.S. business failures. Although seemingly counterintuitive, many experts advise putting cash-flow management before profits. While profits are how an RV business sur- vives, a failure to manage the operation's cash flow can mean running into problems that one profitable accounting period might not be able to offset. Another study, this one by Intuit, revealed that 61 percent of small busi- nesses around the world struggle with cash flow and 32 percent are unable to pay vendors, pay back pending loans, pay themselves or their employees, due to cash flow issues. Cash Flow Management: 101 In essence, cash flow is nothing more than the movement of money in and out of the RV busi- ness. Cash flows into the business from sales of goods, products or services. Money flows out of the business for supplies, raw materials, overhead and salaries in the normal course of business. An adequate cash flow means a steady flow of money into the business in time to be used to pay those bills. How well the RV opera- tion's cash flow is managed can have a signifi- cant impact on the bottom-line profits of the business. More often than not, the operation's cash inflows will lag behind its cash outflows, often leaving the business short of money. This shortage (or cash flow "gap"), represents an excessive outflow of cash that may not be covered by a cash inflow for weeks, months or even years. Properly managing the RV operation's cash flow allows that cash flow gap to be narrowed or closed completely before it reaches the crisis stage. This is usually accomplished by examining the different items that affect the operation's cash flow – and looking at the var- ious components that directly impact on cash flow. This analysis can provide the answer to a number of important questions such as: How well an RV operation's cash flow is managed can have a significant impact on the bottom- line profits of the business. By Mark E. Battersby Mark E. Battersby is a freelance writer who has specialized in taxes and finance for the past 25 years. Working from Ardmore, Pa., Battersby writes for publications in a variety of fields, syndicates two weekly columns that appear in more than 65 publications and has written four books.

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