Leading a balanced life – comparing activities to cashflow

In the world of business, cash is king – especially when analysing the health of a business.  It’s important that cash flows into the business are positive so that the company can remain solvent.  When preparing financial reports, accountants prepare a cashflow statement to show whether the flow of cash is positive or negative; they also break the flows of cash down into 3 separate buckets:

  1. Cashflows from Operating Activities – changes to working capital
  2. Cashflows from Investing Activities – changes to non-current activities
  3. Cashflows from Financing Activities – changes to equity

Although the flow of cash should always remain positive, it’s important to understand that, each of these categories will be positive or negative at different times of the life of a business.  For example, when a company is new, the money that we get from operational activity (profits) will be low or negative as will the money received from investing (buying equipment for the future) and therefore money received from financing (getting more money from investors) must be positive.  So the cash flows end up looking different at each stage:

image

Source: Adelaide University

So as we see here, depending on the phase of the business, the composition of the cashflows will differ.  So, in order to have a balanced business, the cashflow activities must be watched closely to see that cash is all heading in and out in the right places.

Balancing Life Activities

Now consider what it takes to lead a balanced life.  Authors Carlopio, Andrewartha, and Armstrong in their book titled "Developing Management Skills" drew the following chart to indicate the balance of activities that are required in the life of an individual in order to successfully develop resilience to stressors:

image

I think that it’s very easy to look at someone else and make judgements about the ‘balance’ of their life based on what we know of them.  For example, we might know somebody who doesn’t attend church each Sunday and therefore make a judgement that the spiritual aspect of their development is missing.  Or to look at somebody who works hard and think that they have that aspect out of whack too.

Making judgements such as these would be to assume that, unlike the cashflow statement of a company, that each development activity was always present in the life of an individual and in it’s correct ratio:

image

Doing so would be just as harmful and unproductive for an individual as it would be for a business.  For example, when we are studying, life may be skewed towards intellectual, cultural, and social activities whereas physical and work related activities may be reduced to offset accordingly.

image

Note: I’m just making up the mixture for the purposes of giving an example, the mixture will always be different on a per-person basis!

Likewise, there are times in our lives where work takes a more prominent place in our lives so that we can do well and establish ourselves and be able to provide for our families better.  At these times, the increase in work might be offset by social, intellectual, or physical – again, it depends on how each individual seeks balance.

Finding your own balance

Changing the ratio of each task category is done to have an effect on stress.  In the graphs that I’ve provided above, the sum of all activities always adds up to 7.  Think of this as the number of time units that are spent doing stuff.  If we call 7 the healthy base, then when you have times where that number is greater than 7 for an extended period of time, you will be more exposed to time related stressors – such as those that I mentioned in my post about reducing time based stressors.  Likewise, prolonged time below 7 means that you have ‘dead time’ where growth is being limited.

Think about the things that you are focused on in your own life and draw your own chart.  Is it well distributed?  Is it above or below 7?  Now compare it with your current phase.  Is your phase growth-related?  Are you in a developmental phase?  Are you transitioning?  Or are you well into the maturity phase.  Hopefully the chart of where you are directing your activity based time, accurately reflects your phase.

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~ by D on March 16, 2008.

3 Responses to “Leading a balanced life – comparing activities to cashflow”

  1. Great article Darren. It\’d be great if there was a calculator/survey that asked questions to help you work out how you rated.

  2. Working capital financing changes in your business\’ budget can definitely make or break a business. It\’s very important to have a backup plan, or at least an idea of one, of what you\’re going to do in case of extreme changes in your working capital situation.

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