The Importance of Cash Management Catherine's business is growing and she's making a good profit. However, she never seems to have enough money to pay her bills. This month she had to pay the business insurance premium with her credit card. That means that the cash flowing into her business is out of synch with the cash moving out. The result is that she is temporarily caught short when her bills come due.
Business analysts report that poor management is the major reason why most businesses fail.
It would probably be more accurate to say that business failure is due to poor cash management. In this section we'll take a look at the cash flow process to find out. Cash is ready money in the bank or in the business. These might be converted to cash at some point in time, but it takes cash on hand or in the bank to pay suppliers, to pay the rent, and to meet the payroll. A lesson that all entrepreneurs learn is the difference between profit and cash.