Is Cash Flow the King of Conversation?

Cash Flow. This important business metric is so much more than just a one-word-two-word conundrum (I prefer two myself)! So, what is it about these two words that make cash flow the King of Conversation? 

Think about a body and all its components. Arms, legs, fingers and toes; even the hair on the head. They all exist in perfect form because of one thing – blood. 

The blood running through the body helps in so many ways. It regulates the system so that the body can operate at peak performance. Blood is the supplier of oxygen and nutrients. It is the cleaner, the transporter and the delivery service for all the major organs. 

What has this got to do with business I hear you say? 

Well as the great business cash flow specialist Sean McGarry would say, “cash flow my friend is the ‘lifeblood’ of any business”.

You see Sean, a BDM extraordinaire from Scottish Pacific (ScotPac for short), has been discussing this very topic for years. He talks about it, analyses it and provides solutions for it every day of his life; he’s dedicated a career to cash flow solutions. Over many a business lunch, Sean has testified that without measuring and monitoring cash flow, a business simply cannot accurately assess its true financial condition. And he’s right…

A business can have the best marketing plan, solid service or an outstanding product but if there is no money in the bank, it’s in trouble! I don’t care what smart and savvy business analyst or accountant you may be, without cash flowing through the business (operationally), the business will very likely fail.

How Do You Keep the Cash Flowing? gives an insight into cash flow and features an article on one very important aspect of cash flow; collecting invoices quickly (and three tips to getting paid). The article does feature something interesting and that is tip #2 – Go to a third party. 

Whilst I don’t prefer the use of colloquial language, technically the tip is correct when it reads …there are outfits that buy outstanding invoices. Outfits? I’m sure we can describe them better than this? Let me go back to Sean… 

Now you can’t describe Sean as an outfit; I know this for sure. A Business Developer, a Cash Flow Specialist, a friend to the SME owner but not an outfit. The organisation Sean works for is, by far, Australia’s leading Debtor Financier and an award-winning one at that. No less than thirty years of service to the Australian SME community, providing cash flow solutions daily. 

Products and Services

The list isn’t endless but ScotPac’s products and services are impressive:

  • Debtor Finance, Invoice Discounting, Factoring and Selective Invoice Finance (services the other mob would call buying outstanding invoices); 
  • Equipment Finance;
  • Trade Finance;
  • Import and Export Finance; and 
  • Tradeline. 

Take a look at ScotPac’s website for more details (you may read about Sean there too). 

Are there other ‘outfits’ out there offering the same (or similar) products – for sure. However, it’s a little bit like going back to your favourite restaurant because the quality of service is outstanding and the portions are generous; in other words, ScotPac simply does it better!

The Five Ways to Healthy Cash Flow

To prevent the risk of sounding just a little bit too much of a ScotPac fan (well managing SMEs is something close to my heart), let’s look at five other ways to keep healthy cash flow.

  1. Cash flow doesn’t equal profits – Knowing when your business will become profitable is one thing, not knowing when your invoices will get paid is another. Understand the difference between the two and start managing the collection of invoices (receivables) for a good start to positive cash flow;
  2. Maintain a ‘Buffer’ – Every business has cash shortages through its cycle and manoeuvring through these times is a critical component of running a healthy company. When there is a cash buffer in the bank, it is easier to focus on the business and not worrying about having funds to survive;
  3. Remind yourself that you are not alone – Operating a company can be a lonely place. Get accounting and tax advice, ensure your legal affairs are being looked after and talk to a Financier if you have concerns;
  4. Extend Payables (there is a difference to ‘delay’) – Agree with Suppliers to extend payment terms (say sixty-to-ninety days). You may pay a little more but if you equally give incentives to your customers for early payment and build this into the costing process, it’ll balance itself out; and
  5. Leverage off technology – Use tried and tested accounting software to assist with managing cash flow. The link will take you to Quickbooks but there are other providers that do a great job too.

Key Points – Cash Flow 

  • Manage the company like you manage your life – stay healthy, keep the blood pumping and always be prepared for the lows as well as the highs in business. Operating and managing a company is challenging – doesn’t matter what you sell. 
  • Surround yourself with like-minded people and always ask for help. It’s a short four-letter word but it’ll save you from carrying the load by yourself and keep your mental game in check too;
  • An oldie but one that remains true. Don’t spend what you don’t have if the investment doesn’t make sense. Far too many companies get into trouble by expanding too quickly or not knowing what’s going on (poor operational management);
  • Focus on the big picture and the detail will take care of itself. Manage your team but let your team do their job (i.e. don’t do what you pay someone else to do); and
  • Hold regular catchups in areas such as finance, sales & marketing, production and know what’s going on. Your business; your rules!

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