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How to keep your cash flow strong during changing market conditions

Sleeping soundly one day, nightmares the next. That is what it seems like as this pandemic has made its mark with significant permanent changes to our lives and our businesses.

How to keep your cash flow strong during changing market conditions
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  • Paul Roach
  • September 18, 2020
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Not in our working lifetimes has there been such dramatic and unprecedented events that have ravaged the very existence of our economy. Shutdowns that have obliterated our traditional landscapes, lockdowns that have tried to keep us safer than our businesses, and then, as luck would have it, some unique opportunities created.

What is within our control and what is not? Is it our time to act, not react? While Revenue is Vanity, Profit is Sanity, Cash is King. If we have the opportunity to change our command over cash for the better, now is the time! Let us see how we can go about this in changing and challenging market conditions.

1. Calm, focused and agile

It is a bit like running a marathon with a headwind and heavy rain. Trying to change direction to put the wind at your back to propel you forward. It is tough mentally, more so if your business is in hard times. Getting your headspace in an agile frame of mind is super important at this time. Acting, not reacting! Calmness allows us to more readily assess where we are at, think and explore opportunities and find a way forward. We may not have all the answers and the path not entirely clear. Change your environment to help change your thinking.

Calmness helps us to avoid the tendency to react or doing silly things when we are stressed. Cutting the fat from our businesses starts with calm, clear thinking. And yes, the unprecedented pressures of a pandemic call for extra effort in meditating, relaxing, resting and exercising. Toning down the “noise” of the pandemic will help ensure our businesses remain the focal point of our thinking.

2. The art of war

Finding a pathway forward and making sure you thrive during or after these events is paramount. Our economy has changed forever. Supply chains and our associated relationships are under immense pressure. Sales and margins are under constant scrutiny. Employees impacted differently and unprecedented government stimulus. What is your way forward to ensure your business is cash-flow positive? Am I able to achieve this on my own or do I need assistance?

It is a battle to get cash flow in, warfare to keep it in the business. In dramatically changed circumstances, from the activities we are undertaking in our business, what can we obliterate firstly, or secondly, automate? If not, are we able to de-skill, outsource or delegate Delay and defer debt if needed and if you have the option to access additional funding — take it! We need our businesses lean and agile, tight but with some capacity to grow. Eliminate costs where you can, automate if possible, de-skill tasks if it creates opportunities for you. Outsourcing is also an option. Commit to learn, keep your energy level up and make things happen.

3. Smarter, faster business for stronger cash flow

Cash flow can be negative in your business even if you make profit. Your business can also be cash-flow positive even if you are making a loss. What is your cash flow break-even? A great starting point! If we are not at this point, how do we get there — and fast?

Cash flow hides in many places in our businesses. We may not recognise it as cash flow — things such as debtors, stock on the shelf or money spent on surplus plant and equipment. Apart from what shows in your profit and loss, cash flow goes out of our businesses through loan principal repayments, equipment finance loans, credit cards and other asset purchases.

Do you have enough cash flow to see you through? Never run out of cash is the fundamental rule of business. Now is the time to be working smarter. Our supply chains are under pressure along with our margins. Getting a handle on where we are at with this requires effort and focus. This is your role as a business owner; it is not an optional extra to be done “if you have time”.

This is not over by a long shot. It is our ability to remain calm, assess our business and reassess our strategy constantly that will give us a greater chance of surviving and thriving through these times. Speed is important to maximise opportunity. Relentlessly keep cost structures tight, but not stupidly so. Making sure you take control, Cash is King!

Paul Roach is a business strategist and coach who has worked with hundreds of SMEs across many industries.

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