I was working with a client recently. She is really sharp - she understands everything that I throw at her and always asks great questions.
In her case, she was anticipating a negative bank balance six weeks ahead. She hired me to help her organize expenses around this particular week, and to specifically find expenses that we could move around to avoid a negative balance.
We went from top to bottom on her list of expenses, which ranged from about $100 to $50,000. We tried to move some to a date after the week with the negative balance.
I realized that what we were doing was like moving chess pieces on a chessboard. Moving a large bill was like moving a king or queen; it could change the strategy of the game.
Moving a pawn - a small bill from $100 to $500 - would not make a huge difference, but if you move enough pawns they add up and can even win the cash flow game for you.
Are you interested in learning how to play chess with your cash?
If you are, check out my course Winning...
"Lenders prefer cash flow models, not just a profit and loss statement."
"I sat down and said, "I think I can figure out 99 ways to manage cash flow!" and I was wrong. I'm up to 135 ways to manage…so far!"
In the fall of 2018, I was working for an NGO that provided education loans to people around the world and I traveled regularly to Europe, Africa, and South America to meet with people who benefited from these loans. It was hugely rewarding emotionally; I was doing good in the world.
At the same time, I needed more. More of a challenge. More of something that I could call my own. Something I could do part time to meet my creative needs.
I wasn’t sure what to do, so I spoke with my wife and most trusted advisor, Lisa. We brainstormed options for a few weeks.
A Niche to Call My Own
As Lisa and I talked, we discussed the consulting work I’ve done. I’m good at it and it pays well, so why wasn’t that the solution? There were two issues:
It has been challenging articulating what I do when I consult because what I do was different for each client. My consulting approach...
Readers of my article “7 Proven Steps to Manage Your Cash with Ease” asked for more details.
In case you missed that article, or need a reminder, here are the steps.
1. Do Your Bookkeeping for Cash Management
2. Find Cash in Your Business
3. Make Quick Fixes
4. Work on the Big Cash Management Ideas
5. Forecast Your Quickly and Easily Cash
6. Manage Your Cash
7. See Your Results on a Dashboard
This article is an overview on how do set up your bookkeeping for cash management success.
Instead of a checklist or a “how to” article, I will tell you how a client (Rebecca) and I cleaned up the her company books. The company is “The Spa,” a high-end day spa.
(The method is from a real client, but the name and type of company are different to maintain anonymity.)
The End in Mind
Rebecca was stuck at about $3 million in sales. Her biggest concern was running out of cash, even with a big credit line and healthy profits. 2-3 times a month she was almost out...
Sales growth at all costs? Most of the clients that I work with have great sales, are growing revenue, or could grow revenue if they had additional cash to fund the growth. At the same time, every one of my clients is struggling to manage their cash.
After doing the basics of getting their cash management systems in place I almost always recommend that they fire some of their clients.
Yes, fire clients.
These clients are killing the company’s cash flow and slowing or eliminating the company’s ability to grow.
Which Clients Are Hurting Your Company?
There are two types of clients that hurt your company:
Client’s that hurt your profits and cashflow
Clients that hurt your productivity and moral
Getting good advice on how to implement cashflow management practices can be complicated. Improvements to cashflow management are available for all aspects of your business. The tricky part is figuring out what to start with and what practices aren’t worth the time and effort for your business.
The biggest challenge is that some cash management ideas can actually put you in a worse cash position than when you started.
You could start today by implementing some easy things that would give your business quick additional cash. But which easy ideas should you implement? More important, are they right for your business?
I’ve found articles written on each of these ideas. The authors would have you believe that each idea should be implemented by every business:
When people think of cash management, most don’t think about attitudes or mindset. The business owners that manage their cash recognize that faith, gratitude, and thankfulness area critical for sustaining good cash management during bad times and good.
The inspiration for this blog post came to me during the American holiday of Thanksgiving. It is a day where we focus on what we are grateful for. People who are doing well have a lot to be grateful for. People who have had a difficult year often take a step back and reflect on what went well and small blessings in their lives that make the challenges easier to bear.
So, on Thanksgiving I reflected on what I was grateful for, including my work on The Cash Management Project. I reflected on the companies I have worked with and realized that the business owners in real trouble with their cash had a lot in common. They:
In my article “Some Bad Advice on Cash Flow Management” I mentioned that sometimes conventional wisdom isn’t very wise. In this article, I am going to bust the myth that you should always pay bills as slowly as possible and hold onto your cash until the last possible moment.
There are at least seven instances when you may want to spend your cash quickly:
Early Payment Discounts
Some companies will give you the option of either paying in 30 days or paying more quickly, with a discount. The most common discount is 2% if you pay within 10 days, but if you don’t, then the full amount is due in 30 days. This is known as “2/10 net 30.”
Why this a good deal if you have the cash to pay early? It’s like earning 36% interest on your money! The vendor is basically saying...
Most people think that cash management, cash flow, and cash forecast are the same - they are not. If you don’t know the difference, you may have a false sense of security about where you are and the progress you are making.
Even if you do know the differences between the three, you also need to know how to use them to run your business.
I’ll give you a rundown of each one, what they are used for, and some key ideas for using them to run your business.
What is a “Cash Forecast” and What is It Good For?
A cash forecast is a way to predict when cash is coming in and going out, based on your business model. I like to call this “business modeling” because it creates a sense of how your business is run. Sometimes it is also called “cash modeling.”
A cash forecast is also a predictive model of your cash-based profit and loss statement.
Cash forecasts are usually set-up for monthly calculations, which go out 1-3 years. They use cash-basis...