Scale Your Cash! (Part 3)


Who is accountable for cash?

In Part 1, I shared how with just 1% adjustments in key financial levers you can dramatically drop cash to your bottom line. In Part 2, I shared tried and tested methods to improve and accelerate cash. How can build it into our company so it happens every day?
In Part 2, I introduced the Key Function Flow Map. Think of a series of boxes connected by arrows to create a flow chart, first is labeled Marketing, then Sales, then Production and Inventory, then Delivery and finally Billing and Collections. Within each of these boxes there should be a single person accountable for that function. I appreciate that in smaller companies your name be assigned to multiple boxes. As you grow, hopefully you will hire people better than you to be accountable for different boxes.

Again, starting with marketing. Your internet marketing efforts generate 1,000 suspects generating 2% or 20 connections and 2 market qualified leads a month. Your salesperson takes those market qualified leads and closes 50% or 1 a month. We just established the base line metrics against which we can make improvements. If we sharpen our defined core customer, we may lessen the number of suspects to 500 but if your marketing efforts speak more clearly to your ideal customer maybe you generate 50 connections and 10 market qualified leads. What once took you 5 months to generate 10 market qualified leads now takes you just a month. We can similarly look at the salesperson’s close rate. 50% sounds pretty good but if marketing has sharpened the lead pool, why not expect 90% close rate. All of this creates metrics you can follow on a weekly basis to sharpen your sword and put cash in your pocket sooner.

Production and delivery cycles seem easy to establish metrics, how long does it take to build and deliver your widgets. However, inventory is often forgotten. During Covid supply chains were disrupted so we bought whatever we could get on the shelf. Now many of us are stuck with that excess inventory. I like to think of inventory as stacks of cash sitting on the shelf. How long are you going to let that cash sit there? I have heard it called the FISH method of inventory accounting: First In, Still Here! Inventory is a balancing act of having product when you need it, but not more than you need. Many suppliers now offer just-in-time inventory. Check it out.

Billing and collection also can be improved. Do you bill at the end of the month or as a product or service is delivered? Do you get down payments? Do you email invoices to the person who cuts the checks, or do you let your invoices spend 3-5 days in the mail?

What’s the lesson here? How do I build repeatable measurable systems for my business. Create metrics and strive to improve them. Don’t know where to start, just start counting, numbers, time cycles, returns. Each of these are critical to your cash cycle and once you know where you are at, you can establish priorities about where you can make improvements that will be most meaningful. Hold people accountable for their functional metrics and improvement. 1% improvements are not dramatic, except when you start seeing cash literally falling to the bottom line.

This is not your accountant’s job, not your CFO or bookkeeper’s job. Every person in your company should understand that time costs money, mistakes cost money and be looking for ways to put your customer’s cash in your bank account sooner.

If you want help, reach out. I have worksheets to share, presentations I can make for your teams and internationally recognized tools I can bring to your business.

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.