For many privately owned and family businesses the cuplprits are often subtle. Are your “best” customers slowing down their payments ? Are they finding reasons to delay routine payments ? Are you having more returns than usual ? Often these are the early warning signs that sales processes and procedures need updating or corrected. These back office practices are many times the root cause of real problems that show up as ”cash leakers”. If left alone, your strong and steady cash flow will become a trickle.

Another cash flow “leaker” is inventory. Most owners and managers are focused on the “bottom line” and tend to overbuy inventory to acheive a lower cost with hopes of higher profitability. While this seems like a good theory, it normally does not work well in practice. If you save 10% on the original purchase, then anything that goes wrong (damage, obsolence, spoilage,) as well as the cost of storage, retrieval, opportunity cost of money, etc. reduces the savings. All of these costs have been estimated by the University of Tennessee-Center for Industrial Services to be approxiamtely 30%. So unless your company drop ships directly to customers or turns inventory like Dell or Walmart, your “savings” has turned into an extra cost.

One of the value added strategies we offer at CEO Advisors Group is to advise Clients on how to evaluate strategies to improve their businesses. We want to help find your Cash and grow your business.

Bob Webb

Robert L Webb & Assoc
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In several instances, the relationship with the Client was so strong that the customer felt no need to “prioritize” the payment. Other vendors would not accept a delay, but my Client would “understand”. Others had a long-term business and personal relationship with the owner, making it difficult to separate the friendship from the business aspect. Others, used current economic difficulties to excuse their behavior and unwillingness to manage their business and cash flow better – making my Client the “buffer” for their situation.

To resolve these past situations is difficult at best and/or a costly endeavor. Going forward, the Client undestands three changes must occur in his business:

1. Every customer must be made aware that the expectation is for the Client to delver the product or service correctly and the customer must pay timely. That expectation was not communicated effectively and small problems became large.

2. If a customer has a financial issue, that has to be recognized and dealt with quickly. If often makes sense to help a customer during a difficult period. However, it should not change the relationship to banker or lender. It’s better to heed the red flags early and not hope for the best, which rarely happens without effective management.

3. Almost every business is impacted by the current economic slowdown. The most successful use it to improve their operations and become stronger. Others, are dragged down and slowly lose the ability to continue. Concentrate on the controllable factors in your business – improve your internal business processes, shorten your order to cash cycle, offer early pay discounts, stay close to your customers, offer extra value, visit and call your customers more, and react quickly to changes.

Contact CEO Advisors Group and let us assist you grow your business effectively.

Bob Webb President Robert L Webb & Assoc

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