Download - How to be a cashflow commando

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Page 1: How to be a cashflow commando

James ThomsonSmartCompany.com.au

Marc PeskettMPR Group

How to be a cashflowcommando

Page 2: How to be a cashflow commando

James ThomsonEditorSmartCompany.com.au

Page 3: How to be a cashflow commando

Marc PeskettPartnerMPR Group

Page 4: How to be a cashflow commando

Poll question

In the last 12 months has your cashflow got better or worse?

Page 5: How to be a cashflow commando

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

Page 6: How to be a cashflow commando

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

Page 7: How to be a cashflow commando

Cash to cash cycle

Production

& Inventory

Cycle

Sales &

Delivery

Cycle

Billing &

Payment Cycle

90

days

30

days

60

days

Cash

PaymentCash

Receipt

180

days

Page 8: How to be a cashflow commando

Measure so you can manage

• Liquidity

• Cashflow budget

• Rolling cashflow forecast

(weekly, monthly, quarterly)

• Actual vs Forecast

• Regular review of aged debtors and payables

Page 9: How to be a cashflow commando

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

Page 10: How to be a cashflow commando

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

Page 11: How to be a cashflow commando

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

Page 12: How to be a cashflow commando

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 ?

Page 13: How to be a cashflow commando

Funding Options

• Self funding

• Bank lending

• Equity

• Grants

Page 14: How to be a cashflow commando

www.mprgroup.com.au

Page 15: How to be a cashflow commando

Thank you