Business growth beyond sales and marketing - Accelerate Business Group

I've been thinking today about cash flow.  More specific, the elements of cash flow and the timing of revenue and expense. As I use to write The Cash Flow Blog for AllBusiness.com, I think of cash flow occasionally - at least once a month :-)

The cash flow work I did with Guardian Medical Group, has stuck in my mind. I really enjoyed the work I did with Guardian. The secret to our success was the speed at which they implemented suggestions. Their execution was stellar.

We had calls each Tuesday at 11AM Pacific. The calls lasted about an hour, sometimes longer, sometimes shorter, it depended on what we were discussing and how soon we nailed-down an action. Recommendations made in those calls were without fail implemented by our next conversation.

A lesson from that experience is great ideas and action plans are worthless without execution. Taking action is the key to success.

Back to what I was thinking about this morning - a critical element of cash flow is the timing and availability of cash. It was this particular aspect of cash flow I focused on with Guardian.

Guardian's challenge wasn't making money or managing expenses.  Their challenge was receiving and having access to money in the time necessary to offset expenses. Their cash flow woes led to financed operations and artificial limits to future business plans.

The reason I jumped on Guardian's accounts receivable was because it was so large. Making a few changes to their billing practice and process promised to bring money into the business faster, solving their cash flow problem. It worked incredibly fast - measurable results occurred within one billing cycle.

Time to cash is the key to the revenue piece of the cash flow equation. You have to make the sale and collect money before you can pay expenses and service debt. For companies with a small or nonexistent cash reserve, this is a harrowing reality.

When I think of time to cash, a number of things cross my mind:

• lead generation
• sales cycle
• invoicing
• customer payment cycle
• access to cash after receipt

When you forecast cash, all of these things must be considered. If you need money in 30, 60 or 90 days, you have to understand where you are in each opportunity and how long it typically takes to get from you are to cash you can spend.

This is why having ongoing marketing and lead generation campaigns are so important. You don't want to find yourself in the position of needing cash and have to factor lead generation into your plan. You should always have a healthy pipeline of leads. Likewise, you don't want to procrastinate or unnecessarily delay invoicing and receiving payments.

Depending on the quality of the receivable, factoring is an option for some companies.

Beyond the obvious, revenue has an interesting role in cash flow.

Not all revenue is alike. Margins and time are the big differences. Revenue associated with lesser expense is more valuable relative to cash flow, as is revenue that occurs faster. Of the three ways to create revenue -  new customers, increased transaction value, and repeat business - repeat business is most closely associated with higher margins and time to cash. 

If there's something to take from this post, it's likely this - you need to keep your focus on cash flow in your business. The time to worry about cash isn't when you need it. By that time your options are few and often come with consequences. Here are some broad things to keep in mind:

• Always have lead generation campaigns underway
• Offer multiple payment options - check, bank transfer, debit and credit cards, etc.
• Make it clear when payment(s) are due
• Don't cloud payment terms and conditions
• Send invoices on a routine - no procrastination
• Communicate early with a customer who hasn't paid
• Don't overestimate the speed at which invoices will be paid and money will be available
• Maximize the revenue potential of every sale and every customer

Is there anything you'd add to my list?