Seth Godin’s latest Akimbo podcast episode Money flows is a lucid introduction to the importance of cash flow for business health. Even businesses that appear to be thriving can get into trouble due to the gap between the commencement of projects and final payment, which can often be several months. Seth gives lots of excellent practical advice on how to avoid cash flow problems, and is an advocate of bootstrapping, whereby you develop a business model that enables you to receive a large share of payments up front from customers, to help you do the work and deliver.
I well understand the importance of cash flow, as a small business person, and also through my consulting and work experience. Last year, I worked with Craig Lawrence of Lytton Advisory on a project for the Resource Industry Network on the impact of extended payment terms (e.g. 60 days rather than 30 days after an invoice is approved for payment) on businesses in the supply chains of mining companies in Queensland. You can read about the implications of extended payment terms for business cash flow and sustainability in our report, which is available via a link in this RIN news article reporting that, pleasingly, BHP has announced a restoration of 30 day payment terms:
Cash flow is also important to governments, a lesson that was drilled into me during those crazy months in late 2008 and early 2009, when policy makers around the world were dealing with the financial crisis. While the time itself was incredibly stressful, I later had an enjoyable conversation with 612 ABC Brisbane’s Steve Austin about some of my experiences during that time in 2017:
It was during those crazy months when I first learned about Queensland’s own fiscal crisis, from visiting Queensland Treasury officials who were pleading with the Commonwealth for assistance, as I discuss in my book Beautiful One Day, Broke the Next, which the State Library of Queensland will have available for sale prior to the upcoming Grattan Institute budget event I’m speaking at next Tuesday: