Show me the money
Mr. mehra has a problem which he considers rather unique but the fact is otherwise. He is into business of supplying home furnishings. He would source unique materials and finished goods from around the country and the world. He knows that his business has the potential to generate a clear profit margin of 30 per cent. This he thinks is the best investment for him and in my view his decision was quite alright.
With his business acumen he successfully won contracts with many retail chains, malls and supermarkets. But whenever he looked at his bank account he felt he was always left with practically nothing. Where had his 30 per cent profit disappeared? Something was seriously wrong somewhere. This is also quite the situation with many people and it has nothing to do with whether you are in business or in salaried.
Mehra’s problem is not only of cash management; there were, in fact, four distinct problems:
1. Cash management was the primary problem. When there is money “just spend as you like”. This ultimately creates quite a mess and for Mehra he would have to pay in 30 days for whatever stocks and material he bought but would only receive his payment in about 90 days.
2. Business was good and orders were flowing in so he wanted to take advantage of all of them, far beyond his financial means. This is just like a salaried person wanting to take advantage of opportunities to buy things when they
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