How to be a cashflow commando
Click here to load reader
-
Upload
smartcompanywebinars -
Category
Economy & Finance
-
view
1.187 -
download
0
description
Transcript of How to be a cashflow commando
James ThomsonSmartCompany.com.au
Marc PeskettMPR Group
How to be a cashflowcommando
James ThomsonEditorSmartCompany.com.au
Marc PeskettPartnerMPR Group
Poll question
In the last 12 months has your cashflow got better or worse?
Get the focus right
• Many businesses focus solely on
– revenue
– profits
– decision making based on P&L and Balance Sheet
• Cash flow:
• Keeps you in business
• Increases business value
• To manage you need to measure
Cashflow KING
•Knowing
– current cash position and your cash to cash cycle.
• Innovating to increase free cash flow
– shorten the length of the cash cycle, improve margins, reduce waste
•Nostradamus
– Seeing problems before they hit
– Understanding the future cash needs of the business
•Growth
– Growth needs cash
Cash to cash cycle
Production
& Inventory
Cycle
Sales &
Delivery
Cycle
Billing &
Payment Cycle
90
days
30
days
60
days
Cash
PaymentCash
Receipt
180
days
Measure so you can manage
• Liquidity
• Cashflow budget
• Rolling cashflow forecast
(weekly, monthly, quarterly)
• Actual vs Forecast
• Regular review of aged debtors and payables
Get on the front foot with customers
• Set payment terms to suit your business
• Communicate your terms up front
• Obtain trade references and conduct a credit check
• Don’t take on clients that can’t pay
• Use COD to test payment capacity
• Have an accurate and efficient billing system
• Offer convenient payment options
• Consistent with sales and customer relationship
policies
• Sack the client
Handling problems that arise
• Active management of debtors
• Early communication with creditors, ATO, your
bank
• Put payment plans in place
• Daily or weekly assessment of cash flow
management
• Share your problems with advisors, mentors,
friends
Dealing with problem debtors
• Chase late payers immediately
• Keep regular contact with debtors using
different forms of communication
• Escalate your demands
• Understand the customer before offering
special payment terms
• Withdraw credit or get payment upfront before
accepting further sales
• Use debt collection agencies
Funding growth – where the
problems arise
• Profit margins are too low
• Long Cash to Cash Cycle
– Investment in Working Capital > Growth in Sales
• Not enough cash left in the business to fund
growth
– Owners lifestyle costs
• Poor investment decisions
• Reactive in seeking funding help
– Seeking funding for prior year growth ?
Funding Options
• Self funding
• Bank lending
• Equity
• Grants
www.mprgroup.com.au
Thank you