One of the biggest issues facing managers in times of uncertainty – like today – is managing cash flow. If your cash dries up, so do your opportunities. It is my job to help managers develop robust weekly cash flow projections to keep business moving smoothly and help implement procedures to keep the cash moving in the right direction.
With that in mind, here are 7 tips to help you focus on improving cash flow issues, none of which involve borrowing money!
- Get paid for product before you make it – offer a discount if needed. Prepaid sales reduces risk, and puts money in the bank before you even start making your product. Just make sure you deliver!
- Sell off an unutilized asset – land, building, inventory, equipment, or tools. If you are not using it and its not strategic, get rid of it!
- Focus on selling high margin products – there is far more bang for your buck on high margin items than low margin products. The caveat is you need to know what your margins are.
- Focus on selling inventory in stock – If it hasn’t been paid for yet, the bill will come due soon. Move it out the door and collect the cash.
- If you can’t sell it, don’t buy it! Reducing expenses has a far bigger impact on net income than increasing sales by the same amount.
- Reduce your per unit cost of production. Look at manufacturing processes, purchasing, and labor.
- Use technology to reduce your payment cycle – emailing invoices on day of shipping instead of mailing and taking electronic funds (wire transfers, bank transfers, credit cards) can put money in your bank account 7-30 days faster.
You may notice that four of the seven tips are focused on sales, two are focused on cost savings, and one based on processes automation. Cash flow has an inflow and an outflow component – focusing exclusively on one or the other can lead to lopsided results. You have many tools in your tool box, use the right one for the right job and use a balanced approach.
This type of work is often called Financial Planning and Analysis (FP&A). I like to think of it as building a path to a resilient business using solid numbers and knowledge. It is helpful when a business is facing major changes and uncertainties to have a fresh set of eyes assess their current financial situation and develop a sustainable plan to success.
Have more questions? Need to develop robust cash flow tracking and monitoring systems? We are happy to put our experience to work for YOU! Confidential appointments available.