Cash Flow Management Made Very Easy
description
Transcript of Cash Flow Management Made Very Easy
Fast Strategy
Growing the value of your business
what grows value?
§ financials
§ sustainability
§ market power
§ cyclical timing
let’s look at financials
cash flow management 101
cash flow always looks complicated
but it’s not: there are only three bits
cash from operating activities
cash from investing activities
cash from financing activities
what those three things mean is
what you do
what you’ve got
how you pay for the first two
why bother doing it better?
more money in the bank
means less debt or
better cash management
what can you do?
run a health check on all three bits
operating cash: what you do
2"
• get more money in • get it in quicker
• pay less money out, • pay it out slower
investing activities: what you’ve got
• sell redundant assets • apply resources to new processes • own or lease • rent or buy
financing cash: how you pay for it
4"
• get best terms • raise equity • reinvest profits
cash flow matters from start to finish
warehousing and distribution
manufacturing/service executiion
materials scheduling
sales order processing
forecast and supply chain planning
inventory management
product range management
get the whole firm involved
managers
finance
operations
sales
the goal is to reduce the cost of capital
“the greater the difference between your cost of capital and your return on capital the greater the value you create”
a dollar saved means more than a dollar in value
A real example:
cash flow management saved my client $758 a month
he sold the business for 7 times earnings
that added over $60,000 to his sales price.
here’s how
$768 per month = $9,216 per year X 7 = $64,512
how to get a free Lexus:
RRP = $63,750
how are you going? Rate yourself (5 = great; 1 = not so good)
Business Audit - A simple management checklist
© Alan Hargreaves Page 2
rec
ha
rge
wo
rksh
op
1. Financials
RATING (CIRCLE) ACTION
1. Working Capital: How do you rate your working capital management? Are terms and conditions methodically structured and clearly stated? Are they monitored and applied? Are accounts receivables firmly managed?
2. Investing Cash: Do you run a lean asset base? Do you regularly review your asset base, eliminating redundant investments, maintaining the most cost effective mix of owned and leased or rented assets?
3. Funding: Is the funding structure that finances your business the optimal model? How often do you review relationships with banks, shareholders and other intermediaries?
4. Strategic Integration: Is cash flow management a strategic priority across the entire spectrum of your firm: management, sales, marketing, operations, finance?
5. Monitoring: Have you identified your preferred KPIs or relevant ratios that determine the overall performance and value of your business? Are they the right ones? What are the key strategies you can put in place to optimise performance in these areas? What is the most important one for cash flow management?
YOUR TOTAL RATING (A) /25
want to go better? Think about some of these working capital • terms and conditions
• inventory management • payment incentives • preferred suppliers
investing cash • divest legacy assets • reassign resources • rent or buy • lease or own
funding • renegotiate credit lines • add debt • dividend policy • shareholder funding
whole-of-firm • full spectrum cash management • forecast to fulfill • holistic strategies • cost-of-capital targets
monitoring • use of KPIs • appropriate ratios • link compensation to cash flow • decision yardsticks
fast
slow
complex simple
what’s the fastest, simplest thing you can do NOW
for immediate results, try my free app
it show lots of ways to boost your business
you just rate yourself
and see what you can do to go better
you can find many more ways to increase the value of your business at: