A presentation delivered on Monday, May 18, 2020, at the Bellaafrica's "Learn From an Expert" Session.

1. Managing Business Cash
Flow for Sustainability
FOLAKEMI FADAHUNSI
MAY 2020

2. Content
1
Background
The Flow of
Cash
Cash Flow versus
Profit
Business
Sustainability
2
What just
happened to
Cash?
Covid 19 and the
Lockdown
The cash flow
diagnosis
Cash Flow
Drivers
Maintaining
balance
3
Next Steps

3. Lets set the
background
 THE FLOW OF CASH
 CASH FLOW DIAGNOSIS VS
PROFIT
 BUSINESS SUSTAINABILITY
IN THE CONTEXT OF CASH
FLOW MANAGEMENT

4. The Flow of Cash
 Cash Flow is the flow of cash in and out of
your business.
 Cash flow management is about managing
the RATE or the SPEED at which cash flows
in and flows out of your business
 Cash Flow is NOT Profit. Sales minus
expenses gives you profit. But cash in bank is
what cash flow is actually about
 It is possible to make a profit and run out of
cash. With NO cash there is NO business!

5. Cash Flow Versus Profit
 Revenue less expenses equals
Profit
 You can make a profit and yet
not have cash, e.g. if your
customers are yet to pay
 Not making a profit, i.e. making
a loss is not necessarily the end
of your business
 A business can continue for
some time without profit just
like a car can continue working
even though it cannot move
fast
 Cash received less cash paid
out equals net cash flow
 When your customers don’t
pay on time you run the risk of
running out of cash
 Running out of cash may mean
the end of a business if not
promptly addressed
 A business cannot continue if it
runs completely out of cash,
unless new cash is quickly
injected, just like a car will not
move if it runs out of fuel.
PROFIT CASH FLOW

6. Business Sustainability
 Sustainability is the capacity to maintain a
business at a certain level for as long as you
want
 Sustainability is the ability to exist constantly
 A sustainable business is an organization that
prioritizes environmental principles and socially
responsible behavior in its business model
 In terms of cash flow, and in context of this
discussion, sustainable business is a business
that manages its cash flow well enough to
sustain it into the future

7. What just
happened to
cash?
 COVID 19 AND THE
LOCKDOWN
 THE CASH FLOW
DIAGNOSIS
 CASH FLOW DRIVERS
 MAINTAINING BALANCE

8. The Lockdown and National Response
1.6 billion workers in the informal
economy – that is nearly half of the
global workforce – stand in immediate
danger of having their livelihoods
destroyed, warns the International
Labour Organization.
There’s an agreement between the
banks and the Central Bank of Nigeria
(CBN) to suspend staff layoffs until
further notice to help “minimise and
mitigate the negative impact of the
COVID-19 pandemic on families and
livelihoods,” according to the CBN.
The House of Representatives on
March 24 passed the Emergency
Economic Stimulus bill, 2020 to provide
a 50 percent tax rebate for employers
and business owners who agree to not
make staff cuts in 2020.
More than 80 percent of Nigerians
work in the informal sector. In Lagos
State 65 percent of the estimated 25
million people work in the informal
sector. They are unlikely to benefit from
any tax rebate, this implies that the lay-
offs may be inevitable
Nigeria announces $136M to help
businesses. Central bank head says
move will help small, medium-sized
businesses, airline service providers,
hotels, health care workers
The fall in household consumption in
Nigeria will stem from partial (or full)
restrictions on movement, thus causing
(1) consumers to spend primarily on
essential goods and services; (2) low
expectations of future income, and (3)
the erosion of wealth and expected
wealth

9. Cash Flow Diagnosis
 Poor credit controls
 Failure to fulfil your order
 Ineffective marketing
 Inefficient ordering service
 Poor management accounting
 Inadequate supplier management
 Poor control of overhead costs
 Fall in household consumption

10. Needs don’t evaporate, they evolve
Who
How
Why
What
When
Where
Customers, lenders and investors still exist
Products and Services are still required, but digital is mandatory not optional
You need to not just pay bills but create value and create wealth
Essential services take prominent place – Health, Food, Home,
Time boundaries to work/business removed
Location boundaries removed. ‘Wherever’ is the place to deliver and receive
products and services

11. Other Cash Flow Drivers
Cash Inflow
 Products
 Services
 Receivables
 Investors’ funds
Cash Outflow
 Rent
 Salaries
 Owner’s drawings
 Travel
 Loan repayment

12. Cash Flow Balance
 Balance your client base.
 2 X 2 = 4
 Products versus services
 Check your pricing
 Tighten your inventory
 Obsolescence
 Expiry
 Pilferage
 Stretch out your payables
 Strategic sourcing – get
closer to the source
 Form a buying cooperative
 Consider leasing instead of
buying
Cash Inflow Cash Outflow

13. Next Steps
Manage
 Manage existing cash –
but remember that cost
cutting does not create
wealth
 Manage existing
customer/employer –
ensure revenue
optimisation
Evolve
 Digitalise - Your payer still
exists but the need has
evolved
 Enhance your value
creation skills – essential vs.
non-essential
 Make your value available
‘Timelessly’
 Make your value available
‘wherever’
Thrive
 Create wealth – pay your
future self