3 reasons why EVERY business should have a Cash Flow Management Plan

Unlock your true Cash Flow Potential

Unlock your true Cash Flow Potential. Photo Cred: (Unknown)

It is often said that cash flow is the life blood, the oil that lubricates all parts of a business. Our take on it is that it is actually better likened to water in a human body. Cash Flow constitutes more than 75% of your business and it catalyses most transactions within your business and with all your stakeholders. Ensuring a well functioning business often equates to ensuring a well management cash resource. Changes in your assets, liabilities and equity are all different types of cash movements in and out of your business. In fact nowadays most transactions happen through some exchange of value or cash from one party to another. Here are a couple of factors we look at when considering a Cash Flow Management Plan for your business. All pertain to the nature and character of the cash generated:

  • The quality of the cash – certain cash items such as assets have different characteristics within their own group and also differences when compared with other types of assets.

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High Net Worth Individuals or Families (HNWI or HNWF): Are you asset-rich but cash flow poor?

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Almost every business manager or owner is taught to build their productive and value-holding assets in times of excess cash flow. This is because these assets generally assist in times when cash flow is hard to come by. This holds even truer for people/businesses who are still building both their cash flow and asset base. This indeed is some of the advice that I have personally given to all my High Income and High Net Worth clients at some point or other. I have always made an effort especially with business owners so that they can weather cash flow deficiencies better in the future. I often advocate that this be done either in the entity where operations are in effect, a separate entity or the business owner’s personal financial profile. While the type and profile of assets that are most desirable are topics for another blog entry it is vital that one puts oneself in a position to take advantage of this once they are in need of some cash flow injection. Read more

Ideal Client: Who deserves to sit on your throne?

How to find your ideal client

A lot of businesses develop products with certain clients in mind. Through a loss of focus, early successes and/or lack of controls and desperation  they can end up servicing clients who will not benefit the most from their value proposition or less than ideal clients.

Identifying your ideal client is about much more than just identifying the people with the ability to pay or whose need gets satisfied the most by your value proposition. It is identifying the client who is most likely to complete the sale and who exhibits the right kind of behaviour for the cash flow in your business. The ability and will to pay are bare minimum requirements for a client to be a Most Wanted or Most Valued customer. ,I often find many clients who keep providing their services to clients who don’t pay them or clients that keep them helluva busy for little to no money. This is when you actually finance your clients business by giving them value, goods and services prior to them paying you. When these guys don’t pay it often is the case that not enough controls were put in place to:

  • Verify how well these clients pay their other suppliers;
  • Research who they are. Who owns the business?;
  • The schedule of goods and services they offer;

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Core Values and Selling

Core Values and selling

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It is without a shadow of doubt that a person’s core values drives their behaviour. Over the long run it also influences who they associate and build relationships with. Analogously, in a business the core values of a business are often some of the key things that a potential buyer or customer buys into first before they buy into the product. In a highly competitive industry such as legal services in South Africa it is often referrals and/or value-based sales that make one succeed over others. Yes, even with homogeneous goods where your business is a price-taker you can perform better than the rest. Core Values and Selling together generate better cash flow the business in the long run.

It follows from this then that the values are as good as the behaviour that others around you consume from it. If honesty and integrity are your values then you must act in a way that shows that. Clients (existing and potential) will only buy into that if they experience it themselves or someone they trust has experienced it from you. Infusing this understanding into your Sales pitch will move you greatly towards winning that business/work from your potential or existing client. It is often said that if you stand for nothing you will fall for everything. Read more