Focusing on Your Cash Pipeline
Have you looked at your cash pipeline lately? In fact, have you thought about your small business cash management strategy in terms of a cash pipeline? A series of activities beginning with some spending on prospecting and ending with a surplus, after expenses are deducted from what the customer pays.
Everybody will be familiar with the concept of cash flow – in one door and out the other – but that’s an accounting concept. The cash pipeline is a management strategy, consisting of plans, schedules, tasks, milestones – everything with a cash impact. It’s a technique for focusing business operations on things that keep you in positive cash.
This isn’t an idea I’ve seen discussed anywhere. That’s surprising really because every business is ultimately about generating cash to cover expenses and profit.
We’ve all heard accountants and bankers talk about business people as great sales guys, engineers, customer service managers. Inevitably their caveat is the subjects lack of financial management. Unfortunately they’re usually right.
I’m reminded of a (sort of friend) who seemed to run a very good business. He certainly spent lots of money and played plenty of golf on his travels. He tried to get his people using our software but couldn’t. They wanted to keep doing things their way and the boss didn’t want to argue. Why fix something that aint broke?
Or actually wasn’t broke until the company ran out of money. It went bust with more than $500k of profitable orders in the book. A competitor bought out the business from the bank and kindly (?) offered my friend a job – selling the same stuff, to the same people, in the same way he’d been doing for years.
The only difference was he didn’t own the business anymore, and of course no longer plays golf on the job. All because his people didn’t manage his cash pipeline, and nor did he.
Front Office Box helps small businesses stay on top of their cash pipeline.