Cash is King

and so is timing

[buckworks]

Thought for the day, prompted by a private conversation:

The total amounts of one's income and expenses are important, but it also matters a great deal WHEN the money comes in compared to when the bills are due.

[Webwork]

It's good to be the king! [en.wikipedia.org]

- Mel Brooks, The History of the World

[buckworks]

Around this forum we're so used to the mantra "Content is King" that we sometimes forget that other areas need their kings too.

In the last few days I've talked with more than one person who was feeling pinched, not because their income was low or their spending extravagant, but because their income was irregular. The bills and the money seldom seemed to arrive at the same time.

A fat paycheck that will be coming as soon as your big project reaches a certain benchmark doesn't help much with a stack of bills that are due right now.

The timing aspect of cash flow management is a major issue, both for households and for businesses. Learn to think ahead to identify when foreseeable obligations will be coming due, and make sure you're prepared when they do. Life will throw enough things at you that you can't foresee; make sure you're on top of the things that you know are coming.

The first rule of business survival: Stay solvent!

[JS_Harris]

Cash isn't king, knowledge is. No amount of cash can duplicate some websites because there is simply too much going on behind the scenes and it's only fully understood by the developer. Knowledge without cash is a bummer though.

[buckworks]

Knowledge without cash is a bummer though.

Indeed.

And in that context, knowledge is a king without a crown. Creditors won't be impressed with how much anyone knows if the person or the business haven't managed their affairs so that bills get paid as they come due.

The timing issues of cash flow management have put some companies into bankruptcy even though their overall revenues were respectable. The "when" of cash flow is just as important as the "how much".

it's only fully understood by the developer

That's a major hazard that deserves a discussion of its own.

[mack]

I think in life cash is king no matter what way you look at it, some would say "money cant buy you happiness" I would suggest that who ever thought up that saying was filthy rich!

Mack.

[tangor]

If you are a web developer you need multiple projects which have multiple (future) payment schedules so ordinary bills may be paid.

OR

You make enough on one to set up a diversified investment portfolio which will provide the same type of income.

AND (if necessary) have a day job.

[buckworks]

... or have a partner whose income evens out the fluctuations in your own! :)

[lammert]

I actually like irregular income streams. In periods with low income it is a reminder to keep costs low and cut where it doesn't hurt so much, and when a large sum of money comes in when a milestone is reached in a project, it gives some possibilities for long planned purchases or expenses.

With a regular monthly income with saving a fixed percentage of that income per month for large expenses it would actually more difficult for me to maintain the average low cost level and keep enough aside for large purchases/expenses.

[Green_Grass]

I budget on the lowest income flow and enjoy the bonus.. (same as lammert)

[LifeinAsia]

One of the reasons many people get into trouble (both personal and business) is that when their income goes up, their expenses increase to match (if not exceed). It's very easy to spend when you have cash in hand. When the income drops, it's very hard to go back to a lower spending level. Especially if you're stuck in long-term commitments (long-term expensive phone plans, an expensive office, employees with tight labor contracts, etc.).

As much as possible, I try to bank any increase in revenue (especially if I know it's a temporary increase) in preparation for the inevitable (and hopefully temporary) decreases in revenue.

[SEOPTI]

Do no evil and you are king.

[Interent Yogi]

This could do with a little addition.
"Cash isn't king, knowledge is."

All the knowledge in the world is worth Nothing.
IMHO this would be better
"Cash isn't king, APPLIED knowledge is."
All the knowledge in the world gets you no where unless you do something with it. How many people do you know that that know what they have to do to get cash, but never follow through?

[internetheaven]

Of course Cash is the King, I can't stand all this Elvis nonsense ...

... we're talking about Johnny Cash, right?

[zett]

Content is King. Distribution is King Kong.

And cash can buy both.

[Chicago]

It is not cash in and of itself that matters. It is one's mindset and choice of actions without it and one's mindset and choice of actions with it that really matters.

[aleksl]

Do no evil and you are king.

no, and you are POOR, or barely making ends meet. It is extremely rare that a large business has done no evil.

buckworks: The timing issues of cash flow management have put some companies into bankruptcy even though their overall revenues were respectable. The "when" of cash flow is just as important as the "how much".

Let's remember Washington Mutual, Inc. (WAMU), the largest stolen bank so far.

On September 25, 2008, the United States Office of Thrift Supervision (OTS) seized Washington Mutual Bank from Washington Mutual, Inc. and placed it into the receivership of the Federal Deposit Insurance Corporation (FDIC).

The FDIC "sold" [read: gave away] the banking subsidiaries (minus unsecured debt or equity claims) to JPMorgan Chase for $1.9 billion, which reopened the bank's offices the next day as JPMorgan Chase branches.

The holding company, Washington Mutual, Inc. was left with $33 billion assets. According to Washington Mutual Inc.'s 2007 SEC filing, the holding company held assets valued at $327.9 billion.

By mid-September 2008, WaMu's share price had closed as low as $2.00. At the time, WaMu suffered a massive run (mostly via electronic banking over the internet and wire transfer); customers pulled out $16.7 billion in deposits in a ten-day span.

from Wikipedia.

This is tells ya that even one of the largest banks, if not careful, will suffer from either a lack of control over cash flow, or from a hostile takeover (like in case of WaMu), if a cash flow is not under control.

[smallcompany]

because their income was irregular

and

cash flow management

That sounds like a problem of freelance type and self-employed folks like many of us are.
But even with the flow, this may (or has already) become a standard problem of a middle class which has already got hit by the latest worldwide financial issues - simply no enough cash to manage.

I think in life cash is king no matter what way you look at it, some would say "money cant buy you happiness" I would suggest that who ever thought up that saying was filthy rich!

Money is not a problem only when you have it.

One of the reasons many people get into trouble (both personal and business) is that when their income goes up, their expenses increase to match (if not exceed). It's very easy to spend when you have cash in hand. When the income drops, it's very hard to go back to a lower spending level.

That's the nature of Homosapiens. There is a curse being described as a very bad one (paraphrasing in English):
I wish you have, and then you don't.
Most people go nuts is such situations.

It is extremely rare that a large business has done no evil.

Recently I read a claim on some "uncensored" site that only a sociopath can be a leader like CEO, president of a company or country, etc., that makes profit, is successful, take it however you want. Basically, it is about people that can sleep at night after all crap they did (to others) during the day.
Although knowing the term, I was not sure about the definition of a sociopath.
By searching, I got this in Wikipedia: Antisocial personality disorder (ASPD or APD)

Man, symptoms are more than likely of big corps and (all) governments which I identify with small group of people that rule them.

[weeks]

Good thread. I'm having a meeting in the morning with client who is setting up a consulting biz. It's not on the agenda, but we're going to talk about the importance of cash flow.

The thing is, managing via cash flow can be a positive as well as a negative, especially if you have increasing cash flow and decreasing expenses (which is typical on most web operations, since there are a lot of set-up costs but afterwards costs are fixed.)

Therefore, it can be wise to line up the payment of your expenses on the longer side, even using credit (be careful here). And, depending on the vendor, some like getting paid later instead of sooner, depending on their own tax situation.

This works in household budgeting as well, BTW.

[CainIV]

To me, long term multiple streams of income are king.

Knowledge is great, but tons of businessmen who are not entirely savvy or smart have made a plenty penny by hiring others to build multiple streams.

One could say that they simple knew enough - to delegate. Otherwise they were not any more intelligent, or wiser than most.

[MrHard]

It's just a credit line, nothing more.

[tangor]

Just a little commonsense advice from my great-grandmother, my grandmother, and my mother: "Don't bite off more than you can chew" followed with: "If you want to chew, work to pay for it" followed with: "If you have children you will work hard and never squander a dime".

Worked for me. Sorry for the pickle barrel reply...these days I'm stuck in 1910... when business actually worked.

[Petrogold]

All are wrong !
I saw from practical experience that many rich does not have knowlege, cash either. They are now rich as they got LUCK. How many example do you want?
I got knoweldge(may be not enough) & cash (may be not like Bill Gates), I applied every possible evenues and rather lost all my fortunes. And lastly, due eco. downturn rest of my cash gone with equity trade due to sharp fall.Any comments please?

[shallow]

There are other members of the Royal Family:

Saving regularly (for a rainy day)

Keeping out of debt

Living below your means (though this doesn't mean you can't splurge once and a while)

[LifeinAsia]

They are now rich as they got LUCK.

In almost all cases, the "luck" was actually the result of a long period of hard work and planning.

In terms of the actual people who got rich from luck (e.g., lottery winners), this thread is especially appropriate for them. Most lottery millionaires are broke (or at least with less money than just before they won the lottery) within 2 years because they didn't learn how to handle their new found wealth. The smart (and still rich) ones are the ones who invest almost all of that money, continue at their regular jobs, and spend as they did before.

[aleksl]

MrHard: It's just a credit line, nothing more.

then you are one suspended credit line away from broke.

in this day and age - happens ALL THE TIME. search for "suspended credit line" for recent news. Probably the first reason small companies go bankrupt now.

[ken_b]

I'm reminded of the saying that went something like "Banks prefer to loan money to people who don't need it."

[mcavic]

"Banks prefer to loan money to people who don't need it."

And "It's easier to find a job if you already have one".

[MrHard]

then you are one suspended credit line away from broke

Kind of difficult to send a check to suppliers for each order as they come in. Either your have a credit line with them, or you use a credit card.

One of our suppliers charges 18% interest, no thank you.

[Petrogold]

@LifeinAsia
I didn't mean lottery winners. I have got many Arab friends who became rich due to involvements with other investors. They are neither having good know how nor invested by themselves & now having millions cash in hand & are meticulously reinvesting. No question of losing as they employed English consultants to handle their cash.