Lets face it, if a company is not properly capitalized it will have cash flow problems and it is destined to fail and poses great risk. Most entrepreneurs under estimate their cash needs. This is due to so many unexpected events that occur in the beginning stages of operating a business. I have never seen an entrepreneurs initial cash flow plan ever come close to actual. The prepared entrepreneur is constantly looking for more sources of capital even if he or she feels the cash needs are met. It is the responsibility of the CFO to look for these sources of capital. Staying on top of cash needs is a vital component of CFO Services and CFO duties.
What I see a lot of is entrepreneurs trying to survive with small cash resources and then when that runs out put in more cash. Most likely the new cash put in is a minimal amount and that runs out quick. It is a vicious circle and it is throwing good money after bad.
Entrepreneurs must be honest with themselves in projecting cash flow and then must be aggressive in obtaining the cash resources needed. Cash flow problems are the number one frustration for entrepreneurs.
Signs of Cash flow problems include inventory over buys or over production, rising accounts receivable with level sales, large capitalized costs and rising payables.
