How To Manage Your Cash Flow In Business / Complacency Can Crash Your Business

And coming to you again from the airport with a little story about a near air disaster that was caused because of lack of knowing proper numbers.

So what’s this got to do with your business? Read on!

It’s July in 1983 and a 767, an Air Canada flight leaving Montreal flying to Edmonton runs out of fuel over Manitoba.

Now, how does this happen?

In 1983, the 767 was one of the most technologically advanced aircraft in the world, as far as passengers go, and they ran out of fuel.

Well, what was happening was they shifted from the Imperial to the Metric system and the plane was supposed to be loaded with a specific quantity of kilograms of fuel, but they put that quantity of pounds of fuel, which is about half as much fuel as what was needed.

And they ran out of fuel at 41,000 feet while flying over Manitoba.

Now there’s a happy ending here because the aircraft was piloted by a pilot that had a glider experience, and they were able to glide this 130 ton aircraft down to an ex-Air Force base, which had actually turned into a drag strip and they managed to land it.  They collapsed the nose gear, but everyone survived hardly any injuries at all.  It was a bit of a miracle. 

But how does this happen?  Well, they weren’t paying attention.

So their numbers, it was critical that they use the proper quantity, the proper units of fuel, but they put pounds instead of kilograms.

So they weren’t paying attention first of all, and secondly, their fuel gauges weren’t working on the plane that day.  They shouldn’t have been flying.  So they got a little bit complacent.

Now, of course there’s a happy ending, but it shouldn’t happen In the first place. So how does this relate to your business?

Well, it’s very simple.  Are you paying attention to your proper measurements?

So let’s take cash flow or cash in the bank for example:

Let’s say you’ve got $100,000 of cash in the bank. 
You might be happy, but is it actually all yours?

Do you actually have as much in there as you think you do?  You have to take out some for payroll, maybe HST or other sales tax remittances, corporate income tax payables. 

When you look at all the other liabilities that you’ve got, you might not have as much as you need to accomplish your mission, which has to get through to the next pay period to the next month, to be able to set aside the profit that you need to be able to invest in the capital expenditures in your business to be able to grow, to be able to hire the right people.

It’s about knowing the right number.  So in your business, make sure that you know how much of your bank balance is actually yours.

Understand your cashflow: how much is coming in each day, each week, each month.  How much is going out?  What is your net cashflow? Is it positive? Is it negative? And what’s the velocity. How fast is your cash growing?

How fast is your cash depleting?  And what are you going to do about it?

You don’t want to have to be gliding into a payroll period or gliding into a payables coming up and hoping that you make it.  You want to be clear that you’ve got enough fuel, enough cash to make your mission possible.

Don’t be an air disaster.  Don’t be a business disaster.  Know your numbers.

Connect with me on LinkedIn

Schedule a Discovery Call with me

www.kaizenperformance.com

Subscribe to the Take Flight podcast for new episodes every week

Leave a Reply

Your email address will not be published. Required fields are marked *