Cash is King.
Cash is king and anyone that tells you otherwise hasn't run out of it! Cash flow is how much money is either produced or used by a business. This should not be confused with the "bottom line" number of your Profit & Loss statement. There have been plenty of businesses that were generating "profits" on paper that go under because the CASH in their bank account went to zero. You see, banker's don't let you have a negative balance….
Many businesses are reluctant to commit to recurring monthly expenses, and yet are completely comfortable making larger one-time capital investments. The issue with this is that most of those capital investments are depreciated over a five year period, which in technology is a lifetime! Valuable cash is tied up and you end up with a technology platform that no longer suits your business needs and has no residual value.
When Stringfellow develops a Technology Roadmap for our Clients we first focus on reducing capital expenses from the budget, especially for servers, software purchases, and projects. This immediately increases cash flow available to YOUR business. Often times, we can turn the capital expenses into operating expenses. This alignment means that a business now can scale up (or down) without affecting their capital budgets, and their cash flow!
The IT business was built around capital intensive hardware and projects, but this has changed due to the "cloud" and "as-a-service" shift. Businesses that do not have a strategy to shift out of the "old" way are generating less free cash flow, increasing operational risk, and have less ROI in technology expenditures.
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Written by: Edward Stringfellow