To put it in simple terms, it is a balance sheet that includes payments made to the bookie company versus expenditures, over a period of time.
A poor understanding of cash flow is exactly what leads many bookmaking operations to go out of business within the first year, even when they are making acceptable profits.
Here is an example of cash flow:
Before you decided to become independent by starting your own bookie business, it is likely that you were employed at a given company.
A few times, you found yourself struggling to pay bills due, with your check arriving a week later. At that moment, you were experiencing negative cash flow.
The contrary happened when you had more cash available than bills due to pay, which meant that you were experiencing positive cash flow.
Businesses and Cash Flow
Just like regular individuals, businesses (including bookie operations) also struggle with cash flow management. The first year is always the toughest because as a bookie, you must make enough cash to cover a variety of costs.
Many sports betting agents encourage their clients to pay in advance for bookmaking solutions, allowing the agent to count with the necessary cash to pay for what’s necessary to keep the business running, while avoiding the need to collect from clients each time they lose bets.
This is great because it creates a sense of trust between the bookie and the players that pay upfront, with the benefit of granting credit to this type of customers in the future, when a positive cash flow is experienced by the bookmaking start-up.
Remember, it is not the same to have good numbers on paper and having good numbers at the bank, so credit cannot be granted until your bookie operation obtains a solid and healthy financial status.
Now, it is good to point out that, as any business out there, your bookie operation will also experience negative cash flow, and that is just a normal circumstance related to running a sports betting company, but experiencing negative cash flow for too long can be quite detrimental.
Your mission as a bookmaking entrepreneur should be to realize what the actual norms are for your particular industry, and what is healthy.
If you are not good with numbers, your best bet is to hire the services of a financial adviser that can help you understand what you options are in order to keep your bookie business running in the best possible way.
If you avoid long-term negative cash flow and get professional assistance to help you with your finances, chances are that sooner than later your business is going to become very profitable, allowing you to experience positive cash flow on a constant basis.