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Cash is King: How To Manage Cash Flow & Increase Working Capital to Support Business Growth
The document outlines essential strategies for effective cash flow management and working capital optimization to support business growth. Key points include avoiding poor cash management practices, leveraging partnerships, and focusing on operational efficiency. It emphasizes the importance of understanding cash cycles and implementing proactive measures to enhance cash inflows and manage inventories.
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Cash is King: How To Manage Cash Flow & Increase Working Capital to Support Business Growth
- 1. Cash is King HowTo Manage Cash Flow & Increase Working Capital to Support Business Growth
- 2. •Poor cash flowmanagement •Lack of performance monitoring •Improper use of debt •Reactive vs. proactive decisions •Lack of focus & communication Top 5 Reasons Businesses Underperform Cash Sales Receivables Purchases Inventories
- 3. Enhanced Profitability • Havingprofitable sales • Managing operational costs • Managing overhead costs • Leveraging partnerships Working Capital Management • Ins and outs of cash flow • Managing accounts receivable & inventory Keys to Improved Cash Flow Cash Flow
- 4. • Cash paysbills, sales do not • Is every sale a good sale? • Creating a sales culture which understands a good sale • Diversification of products- too far from core business Having Profitable Sales PROFIT
- 5. • Leasing vs.buying machinery and equipment • Maximize staff efficiencies • Outsource work that is variable • Shop production and material costs Managing Operational Costs
- 6. • Dissect yourincome statement – insurance, office supplies, marketing expenses, etc. • Get employees involved in cost reductions • Reward success • Improve processes during slower periods Managing Overhead Costs
- 7. • Create costsavings through strategic partnerships • Explore joint marketing and networking opportunities • Sales compensation reviews • Barter and revenue share creativity Leveraging Partnerships $ Partnerships Sales Compensation B a r t e r & S h a r e Networking
- 8. • Business growthcreates cash concerns • More businesses fail due to lack of cash vs. lack of sales • Understand your cash cycle • Speed up inflows through negotiated terms and A/R management • Slow down outflows through outsourcing and payment terms. Match to inflows. • Communicate with customers and vendors Ins and Outs of Cash Flow
- 9. • 13 weekview • Cash collections (Sales) • Cash disbursements (Material, Payroll, SG&A) • Debt service & extraordinary costs • Line of credit / borrowing base (Eligible assets) Cash Flow Projections
- 10. • Establish acredit and collection policy • Develop billing process which is followed • Negotiate terms, deposits, discounts for early payment • Incentivize sales staff to collect past due A/R • Leverage A/R based lines of credit to bridge invoice / collection gap • Do not become a bank for your customers Managing A/R Collect More $ Lower Cost $
- 11. • Inventory isa liability • Have a perpetual inventory system in place • Do not build inventory against orders you do not have • Slow moving inventory can be used for cash • Ask vendors to take back inventory you don’t need and replace it with inventory that can be used • Leverage as an asset in growth situations Managing Inventory
- 12. 1. Understand yourcash cycle 2. Develop a plan, collect & monitor performance data 3. Profitable sales & cost management 4. Leverage assets for growth capital 5. Focus and communication Top 5 Take Home Tips
- 13. Thank You Mike Semanco President& COO 248.658.3201 HennesseyCap.com