Scale Your Cash! (Part 2)

How do you accelerate your cash?


In Part 1, I shared how with just 1% adjustments in key financial levers you can dramatically drop cash to your bottom line. How can we make that happen?

With hundreds of business leaders, I have helped find thousands and thousands of dollars hiding within their organization, just waiting to be found.

It all starts with your Key Function Flow Map. This is how your company makes money, known as your Cash Conversion Cycle (CCC). It starts with marketing, how you bring in leads, then your sales cycle, your production and inventory cycle, your delivery cycle and finally your billing and collection cycle. Each of these steps have processes and cost money to perform. Three basic ways to accelerate cash through your business:

· Shorten Cycle Times

· Eliminate Mistakes

· Improve Business Model

Shorten Cycle Times. To the extent you can shorten cycle time with any of these functions, you put cash in your pocket sooner. If the time between marketing identifying a market qualified lead and a signed order is 90 days. What can we do to shorten that sales cycle? It may be doing a better job in marketing to generate better leads. It may be sales training to get to yes or no faster. No is often the second-best answer.

If you sell $10,000 a day and your accounts receivable aging is 75 days, you have $750,000 in cash waiting to be collected from customers. Shortening that A/R aging to a more normal 45 days puts $300,000 in the bank. Trust me there are ways to shorten your receivable aging.

The principles of LEAN Manufacturing are all about shortening manufacturing times with better practices and systems. It also applies to other aspects of your business.

Eliminate Mistakes. Every time an order gets sent back to the salesperson to clarify or correct an order, that is a mistake that takes time and costs money. Sure, there is the administrative time going back and forth to get it right but the real cost is the time delay processing a confirmed order so we can get the money in the bank. Mistakes are a huge waste in most every business.

Improve Business Model. Finally, when was the last time you considered your business model? You once paid for your Dell computer when it was delivered. That meant Dell spent cash for weeks before they got paid. Now you pay when you order so Dell has your cash up front. They have literally created a negative cash conversion cycle. They have their customer’s money before they spend anything except marketing. What if you sold car washes by the month or even annually. You get the money up front, and the customer may or may not actually use the car wash. Your business model has many aspects that may be changed to your cash advantage.

Not one of these ideas asked you to cheapen your product or reduce quality. They are about bringing efficiency to your systems.

Jeff Redmon helps his clients create lives they love. For additional materials and help with your cash, just reach out to Jeff.
Through Gravitas Impact, Jeff published his Monograph, CASH, The Fuel for Your Economic Engine – How 1+1+1=19. Available on Amazon.