Cash is King

When things get tough it’s important to go back to basics.  In this economic downturn now is the time to review your organisation and ensure that your fundamentals of business are sound.

 I believe that ensuring your business is as tight and efficient as possible is one way to make certain you have the best prospects of maintaining and even expanding your operation.

 It has never been so vital to maintain a cash flow forecast.  Ideally this should be updated on a weekly basis, projecting out at least 90 days and take into account the impact of market and/or seasonal cycles, loss of customers, work not invoiced yet, late payment of debtors and the like.  After working with the model for a short time (this includes comparing actuals to forecast) it then needs to be projected out for the coming 12 months.  Though this will not guarantee the cash outcomes, it will provide a reliable indication of cash trends over the coming turbulent months.  You can use this cash flow forecast to plan and implement changes that may reduce or delay cash outflows.

Here are some pointers for enhancing that all important cash flow:

  • Active debtor management, including reviewing your terms of trade, doing credit checks, invoicing regularly, and following up debtors promptly after the due date.  One sure-fire way to avoid chasing debt is to stop offering credit!
  • Review all existing costs to ensure every dollar spent produces revenue – cash.  Do not spend on unimportant items and watch staff expense claims
  • Reassess workload increasing it in successful areas and reducing in others
  • Lease instead of purchasing equipment
  • Know your margins - Know them really well, thereby ensuring you are able to validate and continue the delivery of goods and services.  By the way do you know your breakeven point – the number of items or the value of services you need to sell in order to make no profit or loss?
  • Take a drawing instead of a wage will reduce your monthly outflows.  Seek advise before you do this
  • Reduce, reuse and recycle and you too can be envirowise
  • Retain key staff as it often costs more to replace crucial staff members.  Make sure that you and your senior staff are equipped to motivate other staff and provide great customer service
  • Reduce stock to only the most necessary items, and have a sale to move old stock
  • Make your own lunch
  • Don’t forget the tax bill as getting behind with the Inland Revenue Department could mean additional interest and penalties.  By making an arrangement with the IRD you can reduce penalties
  • Play the profit robber game which will help you identify and eliminate costs or activities than begin with prefixes ‘mis’, ‘re’, and ‘un’.  Examples include mistake, misrepresent, missed, redo, revisit, unbilled, unnecessary.  You may be surprised at how many profit robbers you will find – arrest them!


Achieving your financial goals will be much easier if you follow a few basic principles:

  • Write them down and put them somewhere you will see them every day
  • Make them specific and give them a time frame
  • Be realistic, especially if you are starting out with large debts
  • Share your goals with other people, especially people who can help you achieve them.  That includes our team at Business Focus NZ Limited.


Call or e-mail us today and I will send you a cash flow template to get you started.  If you don’t really understand it or you do not know where to get your figures from GET HELP NOW as problems tend to escalate very quickly in tough times.  Your other choice is to keep your fingers crossed and hope!

One last thought – a smile costs nothing.