Whether your business is large or small, commercial or not for profit, selling goods or services, cash is the lifeblood that needs to flow through it. This requires focus – since Cash is King, you need to be the King of Cash. “Making more money will not solve your problems if cash flow management is your problem” Cash Management is all about making sure the lifeblood flows through your business. You need to focus on making sure it: - Is regularly monitored - Flows in consistently and predictably - Is used effectively and efficiently within the business - Flows out regularly in line with deadlines Originally posted here: https://www.ascern.com.au/post/be-the-king-of-cash

1. Cash is King, but
60% of Australian businesses fail
in the first 3 years and 50% of
them are running profitably

2. We all know Cash is King,
we just don’t always know
how to manage it.
Managing cashflow requires discipline.

3. 1. It starts with
understanding
Know your cash conversion cycle
Mike buys stock from a supplier on 14
day terms, holds it for 7 days and sells
on 30 day terms: his conversion cycle is
23 days (30+7-14). He pays for stock
then waits 23 days to earn a return.
Cherie buys stock from a supplier on 30
day terms, holds it for 7 days and sells
on 30 day terms: Her conversion cycle is
7 days (30+7-30). Se pays for stock then
waits 7 days to earn a return.
Cherie is happier than Mike.

4. 2. Be a fan of the plan
Forecast your cash
Start with the obvious:
● sales, purchases, wages
Add the boring:
● statutory payments, loan
repayments, credit card
repayments, rent/outgoings
Include the forgotten:
● sales commissions/discounts, price
& pay rises, owner drawings

5. 3. Manage the damage
No matter how profitable your business
is, there will always be cash pain points
Growing business? Congratulations!
Now deal with cash shortages while
you stock up - improve your
conversion cycle and purchase
carefully to minimise inventory days.

6. 4. Report & React
Know when you’re veering off track and
update management tactics accordingly
Mike’s cash is currently 25% less than
expected and a big stock purchase
needs to be made next month.
His key indicators highlight 2
opportunities to bring cash back on
track:
● Debtor days increased from 30-
38
● Creditor days decreased from
28-21
He immediately ramps up debtor
reminders, statements, & calls, and
changes creditor payments to be on
time instead of a week early.

7. Cash is King, long
live the King!
www.ascern.com.au