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Cash Flow is the Lifeblood of Business

Iconic Entrepreneurs are celebrated, and long remembered after their demise, for their pivotal roles in creating wealth and jobs in a country’s economy.

Talk of Namibia’s iconic entrepreneurs of yesteryear who are still acknowledged to this day, the late Harold Pupkewitz immediately springs to mind.

In Zambia, it is the late Abe Galaun and in turn Zimbabweans still fondly remember the late Sam Levy.

With their genesis in the Baltic states of Europe, Galaun and Pupkewitz were entrepreneurs par excellence who contributed handsomely to the development of their adopted countries.

Never short of controversy, Levy was born in Zimbabwe. Like Pupkewitz and Galaun, he was a hard-working and shrewd businessman.

All three, who were legends in and remain so beyond their times, had something else in common – they lived to ripe old ages passing away as nonagenarians.

Being fortunate to have known and too often interacted with all three, I feel blessed as it was always a tremendous learning experience.

Like the other two, Abe Galaun had so much wisdom to share, as by common sense and through street-smart savviness, he built a business empire in Zambia.

He never failed to remind one that turnover is vanity, but profit is sanity.

And that any business is bound to periodically suffer a loss, but for the enterprise to survive, in the long run, that loss must always be but an island in a huge sea of profit.

But it is Galaun’s reminder on the importance of cash flow as the lifeblood of an enterprise, irrespective of the firm’s size that recently came to mind in discussion with an entrepreneur.

The Namibian entrepreneur bemoaned the fact that he is constantly given the run-around when seeking payment for goods supplied to public sector entities.

I shared with him a harsh decision made decades ago when my business encountered a similar problem – payment delays by public sector entities.

In the short run, refusing orders from public sector institutions hurt me, but in the long run it resulted in business sustainability.
A business must operate profitably to be viable, but the importance of cash flow cannot be ignored.

Banks and funders, when assessing loan applications, pay scant attention to profit projections. They are more interested in the ability of an enterprise to generate cash that is needed to service loans and debt on time every time. That is how they measure business viability and sustainability.

Securing an order, irrespective of its size in monetary terms, means nothing until the customer pays and the money is in your firm’s bank account.

That is prudent cash flow management.

A firm’s demise is inevitable until goods delivered, or services rendered are paid within the agreed time with that the debt fully settled.

Galaun’s cash flow management advice applies today as it did when I had the good fortune of spending time with him in the 1980s and 90s in his modest office in downtown Lusaka during visits to Zambia.

What is the point of doing business with a public sector entity or, for that matter, with any customer knowing that getting paid will be a battle?
It is better to walk away from the deal, as a deal is not a deal until the money is in the bank, your firm’s bank account.