By Tracy Marsh
Peter Johnson was a successful entrepreneur. His growing business earned just over $100,000 annually. Most of us would envy that income. None of us, however, would want his crippling cash flow challenges. Johnsonâ€™s overall financial position was so bad, he considered selling his home, relocating his family and starting over. Would you believe he chose to sell his profitable small enterprise, went to work for somebody else and now earns about 30% less? Would you also believe heâ€™s never been happier?
As Peter Johnson experienced first hand, many profitable businesses fail because of issues related to cash flow. If youâ€™ve ever found yourself uttering the clichÃ© about â€˜too much month left at the end of the moneyâ€™, youâ€™ve experienced a cash flow crunch. For most of us, cash flow isnâ€™t as complex as projecting third quarter profit margins. It can be as simple as knowing thereâ€™s money in the bank when the phone bill is due. Managing cash flow isnâ€™t difficult, but it does take discipline, research and honesty. Like many things worth doing, the bulk of the work is in the preparation. After that, maintaining a personal finance record is routine. The reward will be fewer nasty surprises and an increased ability to see the future, and plan accordingly.
My first serious cash flow wake-up-call came the moment I realized the contract I just signed with a home-builder required deposits of $12,000 over a six month period, in addition to the $1000 deposit cheque that accompanied the contract. My days of writing cheques and crossing my fingers had come to an abrupt end. Out of fear, I created a simple spreadsheet highlighting where variations between revenue and expenditures would allow for large payments to the builder. Since then, I have revised and used the same tool to manage a large renovation project, map out a new lifestyle as a single parent, and generally create a personal financial forecast.
In a recent thread in the Personal Finance Forum on RedFlagDeals.com (RFD), a request for suggestions on software or systems for personal budgeting solicited recommendations for a number of excellent, ready-to-use tools available. Even tech-savvy RFD members preferred using good olâ€™ excel to create a personally relevant and practical spreadsheet. The majority of members who requested a template noted they could create one themselves, but simply didnâ€™t do it. Hereâ€™s the easy part â€“ thereâ€™s a template attached to the article that you can download and customize to your personal needs.
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