“You only find out who is swimming naked when the tide goes out.” – Warren Buffett
With the double dip recession confirmed in the UK, a lot of businesses are finding that the need to work harder and smarter in their businesses is critical to survive and prosper. It is important therefore to remember that the biggest reason businesses fail is because they run out of cash.
The ‘Cash Gap’ is a useful measure to understand why your business may be struggling with cash. Simply put, the ‘Cash Gap; refers to the time in days from when you put in money into your business (through purchase of stock, salary payments etc.) and when you get paid by your customers. The larger your ‘Cash Gap’, the more your bank balance is likely to be under pressure.