Be Strategic With Your Cash

Steps To Accelerate Your Business in 2021

Establishing your cash culture

Build A 13- Week Cash Flow Forecast

Revenue Restructure

Expense Strategy

If there is one thing 2020 taught us all, it was a reminder that there is one thing that matters the most to winning in business – Cash. In fact, we conducted a webinar series discussing a modern approach for accelerating business during the pandemic and maintaining a positive cash flow.

During our webinar, we discussed the Top Five Recovery Actions To Accelerate Your Business. We are now revisiting these steps and discussing how each step can be implemented into your 2021 strategy.

The truth is that the economy’s state does not define a company’s growth phase—it doesn’t—so, keep in mind as we discuss steps on accelerating your business this year.

Build A 13-Week Cash Flow Forecast

One of the best lessons any entrepreneur can learn is the value of a 13-week cash-flow forecast. Let me tell you: There is a reason the smartest financial engineers in business always have them.

For a business to grow, its infrastructure has to be prepared to support it. All too often, businesses aren’t planning their future cash-flow forecasts properly so they uncover short-term cash deficiencies – and this is not a good surprise.

Even a business that’s growing and experiencing strong sales can quickly have more money going out than coming in – and could fail as a result, despite the increase in sales.

13 Week Cash Flow Forecast Spreadsheets Model

Revenue Restructure

When we say revenue restructure, what we really mean is evaluating every step of the Order-to-Cash process. How well the Order-to-cash (O2C) process is structured has a critical impact on cash flow. So what is O2C? It is every step of the journey that occurs from the time a customer places an order to the moment the cash hits your bank account. Common steps in this process include:

Customer order
Fulfillment
Billing
Collections

The goal of the O2C process is to accelerate getting cash into the bank. In other words, to reduce the number of days in the O2C cycle to the lowest number possible.

There are a variety of strategies that can be used to accomplish this goal. In a simple example, charging the customer for goods or services upfront is one method for accelerating the O2C process. For example, professional services companies might decide to charge customers an up-front deposit when services start. Similarly, SaaS and technology-enabled companies will find ways to charge for annual subscriptions (instead of monthly) and also charge customers for implementation services as early and often as possible.

Ultimately, restructuring revenue and improving every step in the O2C process means you will be in the power position with more cash in the bank to use for strategic purposes.

Expense Strategy

Consider sale-leaseback and refinancing of assets, and Identify slow-moving inventory items and how to convert them into cash.

Excess inventory can quickly become obsolete and worthless as customer requirements change, and new materials are introduced. Reviewing and taking actions against idle, outdated, and non-working equipment can free up tied capital, which will be better served in other areas of your business.

Older equipment will usually have a book value equal to its salvage value or less, so a sale might result in a cash gain.

Although this is a temporary fix, as you can only sell an unnecessary and outdated item once, it is an effective and quick way to increase cash flow.

Cash is King

At the end of the day, every single activity that your business engages in leads back to cash. In our experience, great founders are skilled at driving revenue and profit growth. Exceptional founders, however, are relentless about converting that growth to cash. In 2021, be exceptional and outperform your competition.

Start Implementing These
Strategies in Your Business Today.

At CFO Alliance, we help our clients improve their cash flow management and create value with a high caliber team of financial leaders who specialize in transformation through accounting, strategic finance, business process improvement, mergers & acquisitions.

Schedule a call today and let’s start a conversation about your business cash flow today.

Be Strategic With Your Cash

Steps To Accelerate Your Business in 2021