Show me the money

Show me the money

In today’s always-open Internet marketplace, any time you want to draw a crowd, schedule a seminar about digital marketing.

The amount of money spent on digital marketing surpassed TV advertising in 2017 for the first time, and that trend is accelerating this year. Thinker is a Google Partner and is hosting a Google Partner Connect event where Google executives are going to talk about the tools it has to help you increase your digital ROI.

People are flocking to this event, looking for the secret sauce to get their product on the millions of little screens that dominate our daily lives.

There is an even more secret sauce that business owners sometimes forget. Most businesses fail not because they haven’t mastered Facebook, but because of poor cash management. A widely cited U.S. Bank study showed that 82 percent of the business failures it studied were because the owners ran out of money.

It may seem counter-intuitive, but you can run out of money even when sales are strong if you don’t understand where your money is coming in and where it is going out.

Tim Berry wrote an excellent guest column for Entrepreneur in November with 10 cash-management tips. Some of the most important ones:

  • Growth can suck up cash. If you are spending heavily to prepare for a growth spurt and that spurt comes but the payments are coming six months from now, then you can easily go broke. Make sure you have the working capital if the growth doesn’t come quickly.
  • Business-to-business sales can deplete cash. Increasing your sales usually is a good thing, but in business-to-business transactions, you ship the product and submit an invoice and wait for payment. That can be months later.
  • Inventory sucks up cash. Inventory management is crucial. If you buy product to sell, that’s money out the door and that inventory has to move to bring it back in. Inventory forecasting is a key skill to learn for manufacturers and retailers.
  • There are three key metrics to learn to become a cash-management master. “Payment days” is the average number of days it takes you to pay your vendors. “Inventory turnover” measures how long your inventory sits, clogging up your cash flow. “Collection days” is the average time it takes for you to get paid.