CASH FLOW
What Clues Are
In Your Cash
Flow Story?
WHAT STORY IS YOUR CASH FLOW TELLING?
A
s a sales engineer, I spent a lot
of my corporate career ignoring
financial reports, avoiding
financial
meetings,
and
dodging anything to do with
bean counters. I now see the error of my old
ways. Since moving into the world of training
and coaching business leaders in best
practices in Strategy, Execution, People, and
Cash, I’ve found the quickest and often the
most sustainable wins come from studying
cash flow stories. By far.
I once found more than $1.2 million worth
of improvements in one afternoon for a
company with $5 million revenue. That’s a
pretty quick payback, don’t you think? That
8
|
FALL 2018
company was bleeding cash, and their
bankers were about to restrict their credit.
During that afternoon, we reviewed their
cash flow story, and their team committed
to actions that dramatically improved their
cash flow. Within months, they turned the
business around, and the owner avoided a
cash flow calamity.
But there’s another benefit to understanding
cash flow besides finding quick wins. Every
company’s cash flow tells a story. Like a
good novel, your cash flow story unfolds over
time and provides clues to many underlying
themes in your business. Your cash flow
story provides clues to your strategy, your
execution, your people and culture, your
leadership, etc. What’s your cash flow story
telling you? Do you have abundant cash?
Are you satisfied with your profit but “cash
is tight”? Does every $100 of new revenue
enhance your cash or suck cash?
Studying the facts contained in your cash
flow story provides a brilliant way to diagnose
the root cause of your results, prescribe the
steps you’ll need to take to improve, and
serves as the basis for making accurate
predictions about your future. This is what
Jack Stack meant when he famously said,
“Your future is in your financials. You just need
to understand and act on them.”