When reading articles about cash, most tell you silly things, like improving your invoicing, managing your receivables, and stretching paying your payables. Now, all these suggestions aren’t bad, but they’re simple suggestions from people who really do not understand the complexities of cash in a business. Should you look at the quick fixes? Sure, but don’t think this quick fix is solving your problem. You’re collecting cash you already should have. Let’s dive into some things you can do to improve your cash position for the long haul, not these quick fixes you have read repeatedly that never really seem to fix the problem.
I like to think of cash flow as the blood in my body; I need to maintain the business cash flow to stay alive. How I share with business leaders…” You don’t have a strategy if you don’t have sufficient cash.” I need cash to execute my strategy. So, what can I do? Here are three things to improve my cash position for the long term.
First, you need a monthly cash flow projection for 36 months—yes, 36 months! Every month, I will clean up the 36-month projected cash based on my learning from the previous month. This will allow me to use new forward-looking information to better predict. We will be teaching this model in our webinar on July 30, 2024 (www.assuredstrategy.com/events).
The second thing I would do is look at the processes in my company. We help people with process development, gap analysis, and improvement. When we do this work, we have no problem telling people we will get them a 3X return on their investment because usually it is higher. There are so many redundancies or errors due to processes that are not up to date, too many gaps or do not exist. There is a TON of cash in your processes. We will teach this on our August 8, 2024 webinar (www.assuredstrategy.com/events).
Third, look at your customers. Some of them may be buying some of your products or services, but they may not be buying everything you offer that they need. Having been in over 1,000 businesses in my career, I find salespeople do not go back to their customers after a sale to ensure that all their needs are satisfied with ALL the products or services your company offers. With customer acquisition costing around 25% of a customer’s first-year revenue, selling to existing customers is a great way to maintain strong cash flow and tremendously reduce costs.
Fixing cash issues should not be a short-term emergency. The entire leadership team should focus on cash every month. It is not the CFO’s job; it is every team member’s job to pay attention to cash.