The mantra "Sales Cures All" is wrong.
Well, not completely wrong - but only PARTIALLY right.
Instead, CASH FLOW and CASH ACCESS cures all.
Why? Let me explain:
Sales cures all ONLY when those sales generate cash coming in - i.e. cash FLOW.
Sales classified under accounts receivable - where you deliver your product or service now and expect to get paid later - is an I.O.U. with you on the weaker side in the balance of power.
In other words, it's a promise by your buyer to hand over cash at a later date.
It is not cash in the bank or cash in hand.
And as some of you know, promises made are not always promises kept.
Therefore, don't operate under the simplistic assumption that "sALeS cUrEs all" 🤪
Because it doesn't.
And while big sales numbers are nice, you could make all the sales you want and still go bust if you don't have enough immediate cash flow (which directly impacts cash on hand) to pay your short-term obligations.
How are you going to pay the electric company to keep the lights on and pay your employees' salaries? Or how about the interest on the company car loan?
That's why you want effective cash COLLECTION to guarantee cash FLOW to build up cash ON HAND.
Ideally, you don't want a bunch of customer I.O.U.s (i.e. "We promise to pay you - or not")
And as we've seen with the Silicon Valley Bank (SVB) debacle, you not only want cash flow, but ready ACCESS to cash (i.e. you can get to it when needed).
Cash flow is no good when you're locked out of it - or worse, when it goes poof into thin air.
The point of this post?
Sales doesn't cure all, but cash FLOW and cash ACCESS sure as hell can cure a lot 💊 A good lesson for new SaaS founders to keep in mind 🎓
Originally published at https://www.richmondwong.com