Cash is the Ultimate King


Successful businesses do two things #1 they make money and #2 they generate cash.

You can make a profit and still go out of business because you have a negative cash flow.

Remember this statement: Cash is King and in the context of the following discussion, this means positive cash flow – taking in more cash then you are spending.

Positive cash flow will keep the doors open, long after profitability will. [Amazon is a good example – 20 years of no profit???]

Making money is about your profitability and cash is about the wealth-generation of your business.

You can’t spend profit; you can only spend cash.

Positive cash flow gives you the financial cushion – and confidence – to implement changes AND make your BIZ more attractive to future potential buyers because they won’t have to commit funds to working capital.

Let’s define cash flow before we discuss how to improve it.

Cash Flow is the total amount of money coming in & going out of your business.

We know that the majority of small businesses fail within the first five years. U.S. Bank conducted a study and discovered the following reasons for this. They found that 82% of the time, poor cash flow management or poor understanding of cash flow contributes to the failure of a small business. (from Jessie Hagen of U.S. Bank, cited on the SCORE/Counselors to America’s Small Business website )

  • 82% – Poor cash flow management skills/poor understanding of cash flow
  • 79% – Starting out with too little working capital [cash or line-of-credit]
  • 78% – Lack of well-developed business plan, including insufficient research on the business before starting it
  • 77% – Not pricing properly or failure to include all necessary items when setting prices
  • 73% – Being overly optimistic about achievable sales, money required, and about what needs to be done to be successful
  • 70% – Not recognizing or ignoring what they don’t do well and not seeking help from those who do

How do you know if you have a cash flow problem?

To state the obvious: You know you have a cash flow problem If your expenses exceed your cash…then you have a cash flow problem.

If you take in $400 today and spend $500 you have a cash flow of $900 but a negative cash flow of $100

Too many small BIZ owners think that the answer to cash flow problems is to sell more and increase revenue and far too often that only exacerbates the problem.

When you chase growth based on Revenue too often it causes you to make bad decisions because you are operating from the notion that everyone is your market and every product or service you sell and inventory should be sold – there is nothing further from the truth.

When revenue is your end-game and everyone or everything -is your-market is your mind-set, you spend money foolishly on things that don’t matter for customers that don’t matter.

When you take an 80/20 view to cash-is-king, you will discover that you have expenses and inventory for the 80% that are generating little to no profit.

There are several factors to consider before leaping to the “sell, sell, sell!” mindset to reverse a cash flow problem.

  1. Track & Categorize your spending. Make this categorization your first step. You need to know exactly what you’re spending and where you’re spending it.


  1. Benchmark Best Practices. You need to know how other businesses within your industry and market are spending their money and use those benchmarks to spend similarly. You don’t want to spend more cash than you have, so regardless of the benchmarks you’ve discovered from other companies, adjust accordingly depending on your available cash.


  1. Manage Your Spending. “It takes money to make money,” is a common belief and can cause business owners to fall prey to overspending, especially in the early stages of their business. While it’s true it does take money to make money, not all expenses are created equal. Stay aware that every dollar you spend is subtracting from your profit margin, so be especially diligent during the early stages of your business, it is important to consider the cost Vs benefit of every single expense.


10 Ways to Improve Cash Flow

  1. Reduce your Delivery & Invoicing Turnaround Time

Once you sell something, expedite the turn-around time for delivery & invoicing. The faster the delivery & invoicing, the faster you will receive your cash.

Amazon is a great example of perfecting the Cash-Is-King model. Not only does faster delivery ensure a delightful customer experience but also improves their cash flow.

  1. Improve Your Inventory Model – stock & sell only what your TOP clients [the 20%] are buying 

Inventory only what your TOP clients buy and turns quickly.

Think of it this way – and keep in mind, this is an extremely abbreviated way to explain this principle. In real life, you may experiment and track over a bit longer period of time, but this will give you the gist of the principle:

You own a bunch of soda vending machines with 10 rows of different flavors in each row and you fill them every week.

At the end of week one, rows 1 & 2 are completely sold out. Rows 4, 5, 6, 7 & 8 are partially full and rows 9 and 10 are still full – they had no sales.

Replace rows 9 & 10 with one of the flavors in rows 1 and 2.

The next week you discover rows 1, 2, 9 & 10 are now also completely sold out.

You continue with this tracking and sequence until all the rows sell out completely every week.

It will mean you may only be selling 2 or at most 3 flavors, but think about the positive effect on your profit and cash flow.


  1. Have a CYA Cash Reserve

You should maintain some cash reserves to tackle business downturns like economic depression, sudden fall in sales or natural calamity (like the current COVID-19] etc.

As a thumb rule, you should never have less than 90 days cash reserve and as you build your BIZ, shoot for 10-12 months.

Example: If your business’s monthly operational expense equals $10,000 then you should go for a CYA cash reserve of $30,000 as a minimum and $100,000 to $120,000 optimally.


  1. Tweak the Payment Process

Instead of collecting the sale amount after delivery, can you make the customer pay in advance. One way might be to simply offer them an attractive discount for pre-payment.

The earlier the payment, the stronger will be the cash flow.


  1. Negotiate for More Favorable Credit Terms

Ask for longer payment and terms (example: lower interest rate, extend out payment times, etc) on your payables (those you owe money to) and shorter terms on your receivables (those who owe you money).

Implementing Win-Win negotiation skills become crucial in this strategy.


  1. Stay on Top of Receivables – know what the probability of non-collection rate is for your business or industry.

As receivables age, the probability of collection diminishes.

There comes a point where, for cash flow forecasting purposes, you should no longer consider a receivable as collectible. For my dealership that was 120 days.

Here’s an example from a local small business:

Someone in your organization needs to be responsible for and held accountable for consistent follow-up with your customers to help in faster payment of receivables.

You can use multiple communication channels like phone, email or post.

Remember that you need to follow up regularly & frequently. 

For smooth execution of this strategy, I recommend using a spreadsheet for tracking the due dates, payment date, 1st follow-up date, 2nd follow-up date & so on.

Also, the follow-up personnel needs to be in direct contact with the owner for daily or at a minimum, weekly updating of this sheet – I call it the Cash-Is-King meeting.

  1. Consider Leasing of Assets

Leasing requires little to cash up front and means taking possession of an asset in return for periodic installments. This ensures that there is no immediate cash outflow burden.

You can lease things like:

  • Real Estate – Office, warehouse, plant
  • Production machinery
  • Computers
  • IT Equipment
  • Autos

You will need to factor the cost difference (outright purchase is generally cheaper in long-term) before committing to improve cash flow via this strategy.

  1. Take on Only Expenses that Generate Revenue

Most businesses or startups get carried away with unnecessary expenses like:

Fancy/prestigious office space or office furniture

Over-marketing: Marketing to an audience that doesn’t care. Implement 80/20 Sales & Marketing.

Over-Marketing example: Marketing to an audience that doesn’t care. A restaurant where 80% of their customers come from within a ten-mile radius but they advertise on regional tv or radio stations with a 100 mile radius.

Over-hiring: If you have to let someone go or they quit, before re-hiring, ask:

  • Are there parts of the job that someone else on our current team would like to do?
  • Do we even need to hire for this position? Is there anyone or a team of people already with us that could do this job?

How do you know if an expense is really worth it? Simple. If the expense helps your business to generate revenue keep it; If it doesn’t, consider getting rid of it.

Maintaining control of your expenses is critical to not only sustaining profit but also positive cash flow.

When you take an 80/20 view to cash-is-king, you will discover that you have expenses and inventory for the 80% that are generating little to no profit.

 Track & Categorize your Expenses.  You need to know exactly what you’re spending and where you’re spending it.

For each expense ask the following questions:

  • Does my business absolutely need this product or service?
  • If the answer to question 1 is NO, then eliminate it.
  • If the answer to question 1 is YES, then ask:
  1. Do I currently have the least expensive plan, delivery system or item that covers my current needs? If the answer is “no” then change your plan, item or delivery system. (For example, instead of paying an assistant to schedule your appointment, you might use an online scheduling program).
  2. Can I renegotiate my contract? This is always worth trying.
  3. Is there another, less expensive provider that can give me the same result? If so, then switch.
  1. Increase Income Through 80/20 Marketing & Selling Tactics
  • Determine who your Ideal Top Customers are – the 20% that generate 80% of your revenue, profits & cash flow.
    • Fire the deadwood
  • Identify your Unique Offering
  • Create your one-line Unique Selling Message which answers these questions:
    • What does your product or service do that your competitors does not?
    • Why should I buy from you instead of someone else?
    • What guarantee can you make that no one else can?
  • Nurture and protect your Ideal Top Customers
    • Do you have an email list? Are you using effectively? Are you sending out emails at least weekly with offers?
  • Build a referral system from your Ideal Top Customers
  1. Bring in a Guide

Last but not the least, you may deem it prudent to hire a guide to help implement Cash-Is-King strategies and tactics.

It could be a CPA or some other type of Guide. [Is this where we might collaborate w/Tony Busch?]

Such professionals can help you to understand your cash flow problems in more detail, and guide you through implementing solutions.


So, we have covered possible practical ways to improve your cash flow, prune expenses and prune inventory. All are equally important & powerful.

You may decide to use or not to use any one of them depending on your particular case.

No matter what business problems you face, positive cash flow gives you the financial cushion, the time and confidence to implement changes for growth.

Without cash, you are down & out.

And as I stated earlier,

Never forget this: Cash is the Ultimate King. The more cash you have, the better chance for your business to grow fast and sustainably.



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