High Performance: Eliminating the cash crunch

February 10, 2016 - By Phil Harwood

Managing a seasonal business often translates into regular cash crunches, as both revenue and expenses ebb and flow throughout the seasonal cycles—and not in unison.

The good news is there are plenty of companies in our industry who have successfully conquered the seasonal cash crunch. What can we learn from these companies?

First and foremost, they study their financials regularly. It’s a top priority to review daily, weekly and monthly financial reports to remain aware and to make better decisions. They not only know what their cash position is today, but they are reviewing forecasts for tomorrow, next week and next month. In addition to monitoring cash, they’re reviewing a full set of financial dashboards, scorecards and reports. They know their gross profit margin on each service and customer segment. They know what their EBITDA is. They plan for the future with a rolling budget. They know their financials inside and out.

To study their financials they invest in systems and tools that allow them to do so. They researched and selected the best operating software system available because they knew that without this system in place, they would never have the level of information required to be successful. They invested in tools for estimating, pricing, purchasing, compensation and other key areas that have a significant impact on their financials.

To better manage cash, they addressed all of the following items:

Setting up a system to monitor daily, weekly and monthly cash projections;
Obtaining additional lines of credit;
Setting up house accounts with vendors;
Budgeting for cash reserves;
Establishing gross profit margin requirements;
Utilizing best practices for invoicing and collections; and
Monitoring asset utilization.

How to eliminate the cash crunch? Make it a priority to do so. Seek out the best advice from those you know and trust. Invest in the best systems and tools available. Leave no stone unturned. This is what it takes. Are you ready?

Now go forth.