Good cashflow is essential in all SMEs. Not only does it ensure survival… but it can actually gain your company a strategic advantage.
In fact, many highly successful businesses use cashflow as a way to leverage growth and profitability… as a strategic weapon in their armoury.
What’s more, there are ways for any business to improve their cashflow. Here’s what happens when they don’t – and when they do.
How can you gain a strategic advantage?
Just surviving with your cashflow is hard work. It takes up a lot of your key management time and can be a distraction. So there’s an opportunity cost.
Invariably there will be some slips along the way which can either cause, at the very least, embarrassment, or, at worst, loss of competitive advantages – including.
• Missing a sales order
• Missing a (cash) discount
• Stock outs
• Losing a client
• Losing a supplier
• Causing your bank or funder to lose confidence in you
• Higher costs of borrowing
• Defaulting on your funds, etc
So, just surviving is not really an option. You have to be better than that to avoid the type of pitfalls mentioned above. The first requirement therefore, is to have a rock solid cashflow management system and adequate funds. These are issues we work with our clients on, and – yes – it can be done.
Having got to this base level, what can we expect if we are better than this?
Now we’re talking!
Cashflow management correlates very strongly with corporate performance. Hence, successful companies ensure cashflow management gets top priority. You cannot take a half-hearted approach here!
Some of the financial benefits you’ll achieve include:
• Increased cash from improving DSO (daily sales outstanding)
• Reduced credit note activity and improved gross margins
• Increased cash from better supply chain management
• Improved discounts from suppliers and improved gross margins
• Reduced bad debts
• Lower costs of borrowing
The great thing about these benefits is that they take you into a virtuous spiral of improvement, feeding off each other to gain you even greater advantages.
But there’s more… much more. Strategically, you’ll be ‘lighter on your feet’ than your competitors – able to take advantage of opportunities that would have been closed to you previously.
Examples of possible strategic benefits include:
• Getting a product earlier to market, speeding up innovation
• Improving relationships with clients
• Improving relationships with suppliers
• Taking advantage of offers in the marketplace previously unobtainable
We’re sure that you can add to this list when you set your mind to it! If you’d like to know more about turning a cashflow problem into a strategic advantage, give David Wicker or Trevor Hills a call on 03302 200 105 . We’d love to talk!