Solving Cashflow Concerns….Where do you start?
On Tuesday 31st October, we put out a call for your help in putting the finishing touches for our brand new live online training course, Cashflow Acceleration Formula. The response has been overwhelming! Thank you so much for your support: we are reading every single one of your answers and we are very grateful that you took the time to send us your comments.
The interesting fact is that when we talk about cashflow, most people think of Accounts Department and they focus their attention on 2 areas – billing and payment. This is because traditionally, the accounts department has been the one dealing with processing invoices and debt collections.
The truth is that other departments play as important role in cashflow management, if not more important as the Finance Department. For example, if your sales team is not taking any responsibility for non-payment or late payments of their customers, then there is very little your Accounts Department can do in providing optimum solutions that will nurture the long-term relationship with the customer, despite disputes, as well as position you as an important supplier (vendor) to them, so you are always on top of the pile for payment. After all, your sales team holds the key relationships with your customers.
What is the best way to address your cashflow issues? Have the whole team on board, not just the accounts team, and, have them addressing profit issues, as well as cashflow issues. Clients come to us saying “I’ve got cashflow problem” – we say “No, you don’t. You’ve got profitability problem. Without fixing your profitability, we cannot have rational discussion about cashflow – because if you don’t have profits and we start working on cashflow, we can get those receivables coming in sooner, but your company will still be sinking”.
We will be going deep on strategies for increasing cashflow and helping you with profitability in our Cashflow Acceleration Formula live online training, supported by real life case studies. We will be also demonstrating how you can shorten the time it takes your cash to move through your businesses and into your bank account.
However, right now, here are some clues that can help you start addressing some of your concerns immediately:
STEP 1: Define where you want your business to be with regards to cash and profit.
STEP 2: Set up a formal KPI structure against which you can measure your business progress. This should represent the ideal profile for
- Profitability (sales, gross margin, overheads, net profit-before tax)
- Working capital (Accounts Receivable days, inventory/WIP days, Accounts Payable days, working capital)
Then use green, amber, red to colour code the parameters for ‘good’, ‘average’ and ‘bad’ and put the actuals against, so the whole team can see where they are doing ok and where they need to improve.
STEP 3: Roll out the programme across all aspects of your business, so that everyone knows the parameters for success and the progress the company is making:
- Focus your sales team on sales and gross margin results. Since they are responsible for giving out discounts.
- The procurement team (if you have one) should focus on buying products that are enhancing gross margin.
- Have your HR and finance team look after operating expenses.
- Have your sales team and finance monitor Accounts Receivable.
- If you have warehouse team, focus them on monitoring stock levels and if you are service company have your operations team focus on managing work-in-progress (WIP).
- Finance team will look after the Accounts Payable.
Working together, your team can turn around your cashflow very quickly and allow you to sleep at night. Your bank manager will be very happy and will not withdraw your financing facilities, and you will not have to pay huge financing fees to other financing facilities providers. After all you won’t need them if you use the tips, techniques, tools and strategies in the Cashflow Acceleration Formula.
Keep an eye on your emails, we are launching Cashflow Acceleration Formula in a few days!