262 ENTREPRENEURSHIP
Ten Top Cash Rules
Commercial Credit Co. LLC is the kind of
success story every entrepreneur dreams
about. Started with just $5,000 in personal
savings, the high-tech equipment-leasing
company in Irvine, California, posted $11 mil-
lion in sales after just two years. But even
success can produce headaches. Founding
partner Jeff Chasin says, “After about a year,
we realized that there were all kinds of ques-
tions we were too busy running the business
to ever answer. Like, what should we do with
whatever excess cash we might have, and
how would we really ever know for certain if
we did have any excess cash?”
For all the entrepreneurs struggling with
cash management questions, here are ten
tried and tested rules.
Rule 1: Never run out of cash. Inc. magazine
columnist and author of this list Philip
Campbell says, “Running out of cash is
the definition of failure in business.”
Rule 2: Cash is king. The Roman poet Ovid
wrote, “How little you know about the age
you live in if you think that honey is sweet-
er than cash in hand.”
Rule 3: Know the cash balance right now. As
sixteenth-century British philosopher Sir
Francis Bacon advised, “Knowledge is
power.”
Rule 4: Do today’s work today. Stephen King,
president of financial accounting firm
Virtual Growth, points out, “There are often
ways for companies to improve their cash
position simply by making certain that their
billing, collections, and payables systems
are operating as efficiently as possible.”
Rule 5: Either you do the work or have some-
one else do it. Donna McGovern, account-
ant and owner of Ideal Business Solutions,
reports that Commercial Credit hired heras its part-time Chief Financial Officer to
make sure they had not “miscalculated
their cash needs or owed a client money
but had their funds tied up in the wrong
kind of investments.”
Rule 6: Don’t manage from the bank balance.
Once again from Sir Francis Bacon:
“Money is a good servant but a bad mas-
ter.”
Rule 7: Know what you expect the cash bal-
ance to be six months from now. Donna
McGovern advises, “Once you understand
your cash position, you can often follow a
course similar to the one families follow
when building up an emergency nest egg:
Put small amounts of extra cash in a
money-market account” or another invest-
ment vehicle where it can earn interest
and still be accessible.
Rule 8: Cash flow problems don’t “just hap-
pen.” Did anyone believe former Enron
Chairman and CEO Kenneth Lay when he
said, “I mean, the company had a lot of
strong cash flows when it went into bank-
ruptcy”?
Rule 9: You absolutely, positively must have
cash flow projections. Not having them is
like driving a car with your eyes closed.
Rule 10: Eliminate your cash flow worries so
you are free to do what you do best: Take
care of customers and make more money.
As stock market analyst Robert Prechter,
Jr. says, “There’s nothing wrong with
cash—It gives you time to think.”
SOURCE: Adapted from Philip Campbell, “The Ten
Absolutely Must-Follow Cash Flow Rules,” Inc.,
September 2004. Retrieved from the Web July 8, 2006.
http://www.inc.com/resources/finance/arti-
cles/20040901/10rules.html; Jill Andresky Fraser, “The Art
of Cash Management,” Inc., October 1998. Retrieved from
the Web July 8, 2006. http://pf.inc.com/maga-
zine/19981001/1019.html.STREET STORY 7.1