A healthy cashflow is a major contributor to your business’s ability to survive and grow. Do you want to harness the power of your cashflow to grow your business?  Are you struggling to pay bills when they fall due? Speeding up cashflow can help with both these goals. Cashflow Acceleration discusses how you can accelerate your cashflow to improve the health and growth rate of your business. Yellow Belt 

Cashflow is the vital “life blood” of any business.

Cashflow:

Poor cashflow is one of the main reasons businesses fail.
It is not only small businesses that fall victim to this problem.
Big business can also slide into poor cashflow management leading to ruin.

Choice Between Monitoring Cashflow and Profit

Many people confuse cashflow and profit and think they are similar; but they are not.

Cashflow is a far more important measure than profit.
Go to the article: Learn Why Cashflow Beats Profit to read more

The calculated ‘profit’ may not have much reality to the owner/operator down in the trenches.
Cash is either present in your bank account or not. It is an indisputable measure of your businesses ability to survive and thrive.

Being practical business people:

How to Eat an Elephant

Speeding up all aspects of your Cashflow Acceleration at once may prove to be too much of a challenge.

Is your business large enough to have several departments?
Each department can work in parallel on the 4 components of Cash Accelerator.
Form teams if input is required from more than one department.

Is your business a small company? 
Managers and staff will need to pace themselves over the 4 components.

In either case, set yourselves a quarterly goal to work on in the Cash Accelerator process.

The Cashflow Model spreadsheet (available for download in the 12Faces KnowledgeBase – coming soon):

Choose a major topic to work on (e.g. price increase):

What improvement are the changes making?

Incremental business improvement is known as Kaizen.

Kaizen:
Business-wide attention to incrementally improving the areas of your business which will have the greatest return from the application of time, money and other resources.
Go to the article: How Kaizen Leads to Continuous Incremental Improvement..

Not familiar with Kaizen:
Start with small / simple improvements from the following lists. Get some quick successes to build your confidence.

Familiar with Kaizen:
Apply the 80/20 rule via the discoveries you made using the Model spreadsheet mentioned above.
Work on your major contributors first.

Are you getting more successful at ‘eating your elephant’?

Accelerating Cashflow

You have decided to increase the rate of your cashflow.
There are 4 areas where the Cash Conversion Cycle (CCC) can be accelerated.
Go to the article: How to Benefit from Cash Conversion Cycle (CCC) for more details

These are:

1. The sales cycle:
Ways of making the sales process faster to generate cash faster.
Go to the Diagnostic link: I Don’t Know What is Wrong to read more about Sales

2. The workflow cycle:
Reduce the time it takes from raw materials entering your business until the point of delivery to your customer .
The customer is billed earlier and your cash recovered faster.
Go to the list of articles on workflow here

3. Accounts Receivable and Accounts Payable cycle:
Send bills out as soon as possible.
Follow up Accounts Receivable outstanding.
Get the cash owing as soon as possible.
Go to the article: How to Boost Your Accounts Receivable and learn 15 ways to improve your Accounts Receivable cycle.

4. Inventory and Work in Progress:
This is the process of streamlining your production cycle as much as possible.
Reduce the amount of cash tied up in Inventory (raw materials and completed work) and Work in Progress (WIP).
Go to the list of articles on Inventory and Work In Progress here.

Activities to Improve Your Cashflow

Following are a host of activities that you could do to improve your Cashflow.
Select the ones that are applicable to your business.
We refer to articles within 12Faces that cover the topic in greater detail.

Accounts Payable

To improve your cashflow, you want to pay your suppliers as slowly as is reasonably possible.
Go to the article: How to be a Cashflow Wizard to learn how Amazon and Dell Computers use this method to fund their blistering growth.

Monitor your Cashflow carefully.
This will ensure that you have money available to pay your suppliers and other expenses eg. Wages and Tax.
Go to the Skills Module introduction: SM6.0 Profit Autopilot – Introduction to learn about this amazing skill.

Synchronising Company Expense

Is your billing cycle for your customers aligned with the billing cycle of your suppliers?
Does that cycle align with the payment of your Operating Expenses?

For example: Wages.

Speed up your cashflow
Try billing your customers and paying your staff each fortnight.
You will have income coming in at the same frequency as one of your largest expenses goes out.

For example: Billing cycle

Go to the Skills Module introduction: SM6.0 Profit Autopilot – Introduction to enrol in this skill

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