Improving Cash Flow: Small Steps That Work

May, 2016 by Jim Munro

Over the course of recent years, I’ve had the opportunity to address and work with hundreds of businesses, representing a multitude of industries, models, and experience levels. One of the primary challenges offered by owners to accepting external assistance is “we’re different” yet, after so many contacts, the not-so-surprising reality is that each of their ‘unique’ struggles appear to fall within a very simple growth framework and often relate to, ultimately, the lack of sufficient cash flow to meet income or growth needs.

When faced with restricted cash flows, owners find only frustration from other ‘helpful’ advisors that are eager to point out that the issue is the result of a lack of customers, revenue (Duh!), or an insufficient profit margin (Uh-huh…). As none of these factors are easily corrected with a new approach on the following day, the owner is left with increasing concerns – and few answers. A more helpful solution is to break down the (5) primary elements of a successful cash flow equation (the previously listed three factors are products of the underlying elements) and determine exactly which of the elements is not producing the desired results.  Sadly, at times, I have found cases that numerous elements are not producing…period…hence the untenable financial position.

Once you have determined which of the elements offer the greatest opportunity for improvement, you must now create – or select – strategies for moving forward. Unfortunately, this is another ‘opportunity’ to do more harm than good, IF you don’t exercise the focus of starting with the most critical area(s) and limit your implementation to the one or two strategies that can be applied (tested)  – and properly evaluated (measured) – prior to moving on to the next area or strategy for improvement. I have reviewed over 300 tested strategies for cash flow improvement – and I certainly don’t claim to have cornered all of the viable solutions.  So, you can see that focus is the initial key to successful change.  However, taking on grandiose or excessive strategies – strategies that may even have worked well for others – can have extremely negative effects on both your finances and your team, as you dedicate significant resources to a ‘homerun’ or ‘catch up’ effort and find out (too late) that they didn’t work as well for you. Therefore, smaller step successes – on a consistent basis – which are not only more readily implemented, but have led more owners to significant results and long-term success than “grand scheme” plans, are the second key to effectively changing a less than desirable cash flow position and placing your business back on track to achieve the results you originally envisioned.

Structuring for success and building adequate cash flow to accommodate both income and growth needs are the foundation for addressing almost every type of business challenge I have encountered in my years of practice…how about you?

In abundance…

Forbes Coaches Council Member