The difference between sales and cash

small_business_negotiationNot keeping an eye on your cash needs is one of the quickest routes to business failure. So how can you improve your chances of small business success? Start by getting to know the relationship between sales and cash.

Just what is the difference between sales and cash?

Your flower shop has sold a bouquet of daisies to a customer, or your roofing business has just replaced some damaged shingles on a customer’s roof. You’ve sold your product or service to your customer, thereby entering into an exchange with that customer. The customer pays you or your business for this exchange, usually in the form of a cash, debit card, or credit card payment. A sale has been made.

Sounds simple, right? The reality is different. In any business transaction there can be a timing issue. You may not get the customer’s payment for the product or service – in other words, the cash – immediately, resulting in a cash crisis. A cash crisis happens when a business is lacking sufficient cash in the bank to pay bills, salaries, loan payments and so on. So even though you’ve made a sale, it doesn’t necessarily mean you have cash.

As you can see, the difference between a sale and cash in hand can easily spell success for a small business, or something that’s quite the opposite. Next week we’ll show you how to manage your cash flow in order to ensure you’re never caught unawares when it comes to your cash.

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