Cash Flow, It’s Like WW2 Rationing

Cash Flow - RationingCashflow (cash flow)

At the start of World War Two the UK was importing 20m tonnes of food per annum, that was 70% of the country’s need. With a then population of 50m it quickly became a German tactic to attack shipping heading for Britain,

By January 1940 rationing had been introduced, starting with petrol, bacon, butter and sugar.

And The Analogy Is?

Think of it like this.

Cash flow is determined by simple factors – When you have to pay your bills and when you receive your cash.

The variables are in how much you pay/receive and whether there are better options in terms of cost and payment terms,

When you are forced to look elsewhere for suppliers it can work in your favour, you can get better terms and this can benefit cash flow. The question then is whether you should be looking for different suppliers, or at least reviewing them, on a regular basis.

Being forced to change suppliers can add real value. Think of it like this –

Rationing was considered a hardship when it first came into being, by 1942 most children had become used to restrictions on food.

The really interesting part is that following rationing the UK saw a decline in infant mortality and life expectancy (excluding conflict deaths) increased. It was proof that a balanced diet providing essential vitamins had tangible health benefits.

The Cash Flow Danger

We know that rationing lead to better life expectancy. Think of your business in these terms, if you have plentiful cash then how closely do you watch cash flow? If cash is tight do you watch cash flow more carefully?

The real benefit to cash flow is to take action when things are good. Adopt a rationing approach. Assume that things are difficult and seek better alternatives, seek better terms and concentrate on having the essentials as efficient as possible.

This way when cash flow does become tight then you have taken preemptive action, it also means that cash flow takes longer to be an issue and you have more time to get things back on track.

If you have any questions about cash flow then please get in touch by adding your comments above, or contacting us via the website here.

In the meantime, cashflow? We will fight it on the beaches…

By David Farmer

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