How Fast Can Your Business Afford to Grow?

Top CEOs focus on five things: Vision, Cash, People, Key Business Relationships, and Learning. In this five-part series, I’m going to explore why these five focal points are the best uses of your valuable time, and how each can help Make BIG Happen for your business.

Click here to read Part I: Vision — I Can See Clearly Now: Define Your Vision for the Company

Setting a BIG vision for your company’s growth requires courage and commitment.

Fueling that vision requires cash.

Ultimately, it’s the CEO’s responsibility to make sure there’s enough cash on hand to achieve the plans you’ve made for your company.

What you want to do and your ability to do it are so intertwined that monitoring cash is not one of those things the boss can delegate. You have to be on top of the numbers and key indicators. You have to review a daily cash report, a monthly cash flow statement, and an updated monthly projection. You have to see black before you can see BIG.

But just how BIG can you get, and how quickly? That all comes down to your cash operating cycle. Whether your business is services or goods, the time from when the money leaves your business to the time you get it back in the bank looks something like this:

 So, what’s the key to growth? Shortening this cycle. The faster the money you put into the business comes back to you as profit, the quicker you can apply that profit to the leading activities that will move your business towards your Huge, Outrageous Target (HOT).

Here are five tips that will keep you on top of your cash and get your business to BIG quicker:

1. Check your daily and monthly cash flows.

Be paranoid about your cash level. Check the bank every day. Every. Day. What trends do you see? Is your cash on hand growing, shrinking, holding steady? How does your cashflow compare to your accounts receivable and payable? If your debts are racking up faster than your cash, figure out why. Are you giving your customers too much time to pay you? Are you purchasing too much stock? Are your salespeople selling too little? Are you wasting cash on a legacy product, service, or satellite office that just isn’t profitable anymore?

2. Get paid quicker.

What does your billing cycle look like? Do you send out monthly bills? Switch to bi-monthly. Quarterly contracts? Switch to an annual contract at the current rate, and charge a slight premium to quarterly subscribers that will entice them to pay you in full up front. Are you a service company? Bill for your service fifteen days in advance.

Speeding up your billing cycle might seem like a small thing that won’t affect your overall earnings. But the less time you spend waiting for cash, the sooner you can use cash to pay down your debts, or stock up on a new product, or go after that dream sales manager you know might cost you a little something extra, or budget for a new social media campaign targeting an important prospect demographic. If your products and services are delivering a high value proposition, then your current customers won’t mind paying sooner. Your new customers won’t know the difference.

3. Tighten up your billing and delivery.

The faster you can turn around your product or service, the sooner you’ll get paid, and the less money you’ll have tied up in “work in progress.” If there’s a persistent bump in your supply chain, find a more reliable supplier. If your billing or customer service team aren’t hitting their processing targets or staying on top of tardy customers, replace them with better performers. And make sure your billing system is fast, effective, and error-free. The costs of updating an outdated billing system will outweigh the time and money you’re wasting on the back end fixing mistakes or smoothing things over with grumpy customers.

4. Factor your accounts receivables.

Not my favorite idea, but in certain situations, a necessary one: if you’re really in a cash crunch, you can “sell” your accounts receivable to a factoring company at a discount, and get the cash immediately.

Why don’t I like factoring? Because it’s a short-term solution that often masks bigger problems, not an effective long-term strategy. Before you go this route, take a good hard look at the other three cash accelerators, and ask yourself why you’re really factoring accounts. Is a quick injection of cash going to achieve a big picture goal? Or is this a panic move?Are you kicking the can into next month, when the same underlying problems with your cash flow will trigger another rash decision?

Cash is like oxygen. A short time without it and you are dead. But blow enough of it onto a spark and a blaze ignites. Make sure you have enough cash on hand to ignite your vision, and Make BIG Happen!

To be continued in Part III – How to Get the Right People in the Right Jobs

About Mark Moses

Mark Moses is the Founding Partner of CEO Coaching International and the Amazon Bestselling author of Make Big Happen. His firm coaches over 150 of the world’s top high-growth entrepreneurs and CEO’s on how to dramatically grow their revenues and profits, implement the most effective strategies, becoming better leaders, grow their people, build accountability systems, and elevate their own performance. Mark has won Ernst & Young’s Entrepreneur of the Year award and the Blue Chip Enterprise award for overcoming adversity. His last company ranked #1 Fastest-Growing Company in Los Angeles as well as #10 on the Inc. 500 of fastest growing private companies in the U.S. He has completed 12 full distance Ironman Triathlons including the Hawaii Ironman World Championship 5 times.