In recent blogs I’ve stressed the importance of business planning, and that cash is the oxygen of business and necessary for business survival.
But first you must know your numbers. In real time.
Your cashflow forecast will drive your short term business plan. To improve cashflow or profitability:
- Review all fixed and variable costs – cut the fat, get lean – even if that means redundancies, downsizing, or changing the business model
- Review sales forecasts and sales plans –increase sales without increased spending, or maintain sales with reduced spending
- Improve production efficiencies (your gross margin)
- Review & tighten debtor management processes – terms of trade, invoicing, and collection
- Reduce personal drawings
- Sell under-utilised assets to free up cash or reduce debt
- Tighten ordering and purchasing processes and policies
- Negotiate terms and prices with suppliers
- Right size stock holdings
- Complete jobs faster to reduce work in progress (WIP)
- Make your people more productive and accountable
- Obtain funding from appropriate sources (banks, government, shareholders, invoice financers, suppliers, other lenders etc)
- Always have up to date financials, compare these to targets and budgets (daily/weekly)
Review that list and ask yourself “HOW?”. The answers to “HOW?” will form your business (survival) plan. Think outside the box. Brainstorm. Innovate. Be determined.
For example, “How can we reduce WIP?” Answers may include:
- Proper planning (all required material, machines, and staff ready on start date)
- Re-engineering (streamline processes, rearrange workshop, use technology efficiently, maintain equipment)
- Training (agree on best practice, performance indicators, and expectations)
- Tracking and reporting – KPIs and hold people accountable for outcomes.
Involve your team (internal and external) in the “HOW?” process. Then the rubber must hit the road – decide, execute, and make it happen.
Aim to be 1% better in 100 things.
Get 1% better every day.
Ask Q2 about their “10 Hats Cashflow Forecast” process –funding is available from Regional Partner Network for eligible businesses.