The universe is built on cycles. Everything that is, was, and will be follows a pattern. On a long-enough timeline, nothing is static. Given the timeline of our lives, the cycles of the universe are invisible. Ten billion years doesn't really make sense to a creature that might live for a hundred billion years. On a smaller scale, you can observe the birth and death of stars, galaxies, the orbits of planets and moons, the tides, the seasons, the night and the day, and even your own circadian rhythms that govern basic human functions like sleep. Almost nothing is static. Yet the way some people treat their collection of cards, it would appear as though their trading strategy is frozen in time.

As any savvy business owner knows, the cash-flow pendulum is anything but static. It's possible for a company with a high value to still be cash-poor. Value can be eaten up by things like labor, real estate, carrying costs, and the wholesale cost of goods sold. In a trader's case, the binder worth $10,000 is his value. His cash on hand is a totally different animal. He cannot go buy a car with his collection. He has to turn it into cash first. That's why it's called "work," not "free money." His work is only as valuable as his company. If he can turn over $100 of cards an hour, that's what he's worth. Not $10,000.

Remember when you were a kid and you heard about an adult earning $XX,000, or $X00,000, or even $X,000,000 a year? Your reaction was most likely similar to mine. "Holy Dragon Fodder, that's a lot of damn money!" I believe my thirteen-year-old self mathed out how many pairs of Reebok Pump-Ups I could buy with that much money, and the number was enough to make me giddy. But, in reality, there's no way that someone who makes $100K a year at a traditional career actually has that much money just lying around. After taxes, the mortgage, student loans, credit cards, car payments, food, gas, beer money, Magic cards, and so forth, your $100K starts to look like it's sadly misplaced a zero or two. You just don't have cash. And even when you do, aren't there always infinite things you'd like to do with it? That's why cash flow matters. It's easy to get a false sense of accomplishment looking at a stuffed trade binder.

I'm not an accountant, but here's a layman's definition. "Cash flow" is the balancing act between accounts payable and accounts receivable—in other words, trying not to spend money you don't have. Cash insolvency is a threat on every level of business, and since trading effectively bears many parallels to corporate finance, you should know how to work against it.

In the card business, we focus almost exclusively on cash flow. If the cash isn't coming in, nothing else matters. It doesn't matter how Web 2.0 your optimized workflow is, because optimized workflow doesn't pay the rent. Cash flow is the heartbeat of any functional business. The trade binder worth thousands is only a tool that enables you to convert time into money.

Cash flow is another one of nature's cycles. If you're selling cards to make a profit, you need money to buy cards. If you spend all your money buying cards, you'll run out of money to buy more until you sell those cards. For the purpose of this explanation, we're going to treat the card-selling game as a closed system. You start with a fixed amount and don't get to add more or withdraw.

On one side of the pendulum, you have the dreaded cash crunch. Cash crunches are when a normally successful business runs out of liquid assets. This can happen due to poor planning, unexpected expenses, disaster, crime, or just a sudden decrease in sales. My favorite kind of cash crunch? Spending your rent money on a piece of high-grade power that you have to flip before the end of the month! Whatever the reason, being cash-poor is expensive. Much like how banks charge you money for not having money, having no cash usually leads to expensive missed opportunities.

Missed opportunities are the cost of not having money. If you consider these just as bad as losing money outright, the cost of cash poverty is clear. I had an opportunity to buy a collection for around $2,000 last year, which I had to decline because I hadn't anywhere near that level of liquidity. I'd just paid rent on my store and all my other bills, and I couldn't risk it. It was full of old dual lands, full sets of original expansions, playsets of powerful old cards . . . the works. I could have easily flipped it for double with almost no work. In fact, I could have just mailed the box to CoolStuffInc and snap-accepted their first offer. I didn't have the money, so I passed. In this way, not having $2,000 cost me another $2,000. That really sucks. You'd work like crazy to avoid losing $2,000; why not work as hard to make it?

The other end of the spectrum comes around when you've got loads of cash in the bank and nothing to do with it. That's called being cash-flush. Idle money is bad, but it's not quite as bad as trying to spend nonexistent funds. Idle money is money that's not earning interest, or that's not being leveraged to start a new business or buy a collection. Idle money is money that you probably don't even notice you have, since it's doing nothing. While this sounds like a great problem to have, and it surely is, it's a problem nonetheless.

Managing the two sides of this pendulum becomes a full-time job, but when you get into the pattern, you can gain a lot of momentum very quickly. Picture a schoolchild on a playground swing. If he pumps his legs against the momentum of the swing, he will remain slow or static. If he pumps his legs with the momentum of his swing, he will eventually swing as high as he wants to go. Should he locate a nearby pile of leaves, he can then dismount in glorious fashion.

You don't have to be a Fortune 500 CEO to manage cash flow. In fact, you can do it with your own trade binder without ever using cash. See, there are a few cards in Magic that are often as good as cash. Those cards are defined by their liquidity, and they are often the hot mythic rares of the day. These cards appeal to almost everyone, have significant value, and can often fetch a premium in trade. Sounds a lot like cash to me. The trick is twofold—first, you've got to find these cards, and second, you need to know how to evaluate which mode you're in. You're either in "turnover" mode or "acquisition mode."

The Easiest Way to Ensure Turnover

In my retail store, a recent inventory checkup indicated that we had acres of cards that hadn't sold in months. Once I've had a card for around three months, I consider it "at-risk" unless it's a speculation card I'm hoarding. After three months, I get fed up with the carrying cost and just try to turn it into any amount of cash possible. You can easily tell which cards have been sitting around simply by making new trade binders as you get new cards. Each week or month, depending on how often you acquire cards and how many, just make a new binder with the new acquisitions. Eventually, you'll have a binder full of crap that's been sitting around for months. Just take it to a few dealers and blow it out. You'll enjoy watching the 25¢ rares pile up, and you can reinvest the cash into new, liquid product. Using the binder system is an easy way to "cheat" and know what's cost you the most money over the long run.

Other than using a time-based system to handle at-risk product, you can also just aim for liquidity at all times. Commander cards are great, and are gaining steam, but they are still not nearly as liquid as a Tezzeret, Agent of Bolas. In a situation analogous to being cash-poor, a binder full of niche Commander stuff and altered-art Japanese foils is clearly worth a small fortune, but these cards have no mass appeal and may well be so expensive that they price potential traders out of making a deal. You have many assets, but almost no ability to quickly and easily generate cash. Thus, when a good deal arises, you can't take advantage of it expeditiously. That's the worst fate a trader can meet outside going bust entirely.

How Liquid Is My Binder?

Have a look at your binder and evaluate honestly how many people would really want the contents. Is it stocked full of Grizzly Bears? Time to make some changes. Are you just stocking Jaces? Then you might want to break a few of those into speculative rares, diversify into more tournament staples, or just cash out. The optimal balance between cash (or liquid assets) and stock is difficult to strike, because you're almost always going to be on one side or the other. Just accept that—much like those eye exams where you have to indicate the timing of an image—you'll never quite get it right. Close enough is good enough, and to perfect it would suffer from diminishing returns. Quite simply, how does your "net worth" stack up against your ability to use that net worth? If you have $1,000,000 in Grizzly Bears, it doesn't matter. You'll never move enough to actually cash out $1,000,000! If you have $1,000,000 in Jaces, however, you can convert those into dollars immediately.

As soon as you realize you're missing chances to buy collections, quit being a tightwad trader and start cashing things out. You'll want to scour dealer buy lists (as I've said many a time, CoolStuffInc has a great buy list) and flip three categories of cards. A trade binder is good to have, but cash is better.

1. Overstock: Do you really need twelve copies of Wanderwine Hub? Chances are, the $8 you get from blowing out copies 5 through 12 will do more than those copies will. Their value is irrelevant because they are not meaningfully adding to your ability to buy, sell, or trade. You'll still have four to work with, so those are just dead money.
2. Overpriced cards: The reason is irrelevant. Maybe the buyer is stupid. Maybe the card is overhyped. Maybe the store just needed another play set and doesn't mind paying extra to be sure it gets it quickly. You'll know best how much you need from a given card, so don't get caught up in the "market value" of things. If you can cash out for more than you bought/traded in, you're winning. Even if it brings your stock level to zero on that card, a good price is a good price. You can always acquire more.
3. Meaningless crap: Go fire up some buy lists, and you'll see prices that will shock you. Tournament players in particular have a horrific blind spot. To them, nothing outside the realm of competitive Magic exists in this game. Their ignorance is your gain; by knowing that cards like Leaf-Crowned Elder sell well to casual players, and thus to dealers, you have a leg up already. Finding the cards that you can get cheaply and flip to dealers is most lucrative. While you may feel like a moron spending all afternoon selling 25¢ cards to four different dealers, as I did today, the money adds up quickly. This is a great way to reduce your collection's size, too. Fewer cards to sort means more time to spend on relevant, fun tasks like playing Magic!

What About When I'm Straight-Up Ballin'?

When you're cash-flush, on the other hand, you need to scour the Internet and your social networks for outlets. Maybe you have a buddy who plays poker and needs a small stake? Maybe you can dig for last-minute bids on eBay, or scavenge-buy lists on MOTL. Why not hit Craigslist and look for collections, perhaps even post a "MTG cards wanted" ad? Hit some card shops you've never seen, and dig through their stuff. Whatever you do, don't let the bank sit on it and pay you an interest rate that doesn't beat inflation. Get that money working. It's fine to have cash on hand . . . as long as you have a plan for it.

Having some money sitting around is great, since immediate access to funds can change the dynamic of many a sale. Cash in hand beats money later, and it's very easy to get a discount by offering a wad of twenties rather than a check next week. Thus, having some money designated as intentional liquidity is advisable. How much? Only you can answer that, but I'd suggest being aggressive at first. Going for a 50/50 balance between cash and inventory means that it's hard to be truly wrong, but it's also hard to be truly right. It's a fine hedge for the uninspired, busy, or lazy, but refinement will tighten up margins and let you ride the swings with more momentum.

In many ways, managing cash is similar to the bulking-and-cutting cycles of weightlifters and bodybuilders. When I opened my retail store, we were "bulking." We had capital, and a growing customer base that was steadily buying cards, and our main goal was acquiring cardboard. This was important, because we wanted to cement ourselves as the local singles dealer from day one. The strategy worked, and we now have a loyal rotation of customers who supply us a steady stream of cards. In fact, we acquire more cards than we can process. This is a First World problem, to be sure, but it usually means our cash is tied up longer. We have a few bucks here, a few there, but our money is pretty much all over the place. A week or two of hard work will have those boxes of Shards of Alara uncommons pieced out to dealers and players, and into bulk (which can be sold easily, and is basically liquid). In the end, having the ability to make large purchases will save you time and money. It takes far less energy to flip a single $1,000 card than it does to make the same margin on dollar cards. The sooner you convert assets into cash, the sooner you can level up to bigger transactions.