Post-pandemic Guide to More Cash Flow
As we enter the post COVID-19 pandemic economic recovery, the generation of cash flow is of paramount importance to your business. Here are the steps to take now:
Know your numbers
The best business leaders are able to describe their business numerically. Exceptional growth comes from the precise understanding of all aspects of your business, including key metrics and the status of current resources, such as cash and credit.
Leverage low cash growth strategies/platforms
Build low cash, growth strategies upfront, such as: non-core outsourcing, well negotiated deal terms, and scalable, multi-channel business models. Leverage low cost technology platforms.
Maintain control of your financial systems at all times
Never, ever lose control of your financial systems. Review your financial statements frequently (monthly) and cash position (weekly). Audit your systems regularly.
Deeply understand your sources and uses of cash
Learn how cash flows in your accounting system and know what drives cash generation/ consumption. For instance, if your revenue increases, but inventory increases more quickly, cash will initially be consumed, not produced.
Be fanatical about improving margins
Know your margins to one decimal point, set targets for each product and sector, cull the lowest 10% margin customers per year, and constantly test and iterate your offers to improve future margins.
Manage working capital well
Run an aggressive accounts receivables strategy and mitigate payables. Work strategically to reduce working capital through new business models, and outsourced fulfillment.
Play cash offense by driving sales
Start by selling more of your current offers to existing customers, then new offers to current customers, and finally sell current and new offers to new customers.
Play cash defense through expense reduction
Implement a performance improvement system like Lean, which focuses on the functions that deliver value directly to the customer and eliminate the non-value-added waste.
Be ROI driven
Focus all your key investments to give you the biggest cash return. i.e. hiring customer focused employees, restructuring processes cycle times, and new capital projects that build future cash streams.
Eamonn Percy is a business growth strategist, advisor and coach to entrepreneurs and business owners. Learn more at Percygroup.ca.