Winning at business isn’t just about grit and determination. It’s also about strategy and timing. And, you have to master cash flow optimization if you want to excel.

So, how do we shift your liquidity from “just good” to truly GREAT?

The answer isn’t in a Google search. It’s also not ChatGPT. You need the right blueprint and reliable guidance from trusted resources. Check out our best tips and cash flow optimization techniques.

It would be fantastic if you could solve all of your operational and revenue problems by simply bringing in more money, wouldn’t it? But for every  Microsoft or Alphabet, there’s a Signature Bank or WeWork that had lots of capital and still went under from an avoidable crisis.

It’s not just about getting the cash. With cash flow optimization, you’re ensuring you’ve got the cash in the right place at the right time so you can do what’s best. Whether you’re boosting inflows, reducing outflows, or adjusting payment terms, you’ll see:

• Improved stability and flexibility
• Better relationships with suppliers
• Higher profitability

This adds up to a stronger brand as your decisions lead to more effective operations, investments, and financing. (Who knew?!?!)

So now you’re asking: how do you make cash flow optimization a reality for your organization?

Here’s your blueprint for success.

The logical place to start is at the source of your cash inflows — accounts receivables. Start optimizing cash flow by making sure you’re getting the money that’s rightfully yours when you should have it.

Set reasonable (and market) payment terms for clients and stick to them. Your AR team should coordinate with the sales team and customers to ensure alignment.

That might mean that you do things differently for different customers. So, keep those terms, billing, and collections arrangements up-to-date in your customer master data. Automation will be key here to ensure efficiency.

And, please – don’t be desperate to hold onto any and all customers that you offer unprofitable discounts or consistently let people pay late. We promise this will kill your cash flow.

We know it can be challenging, but you’re growing a business – and you need it to be cash flow positive.  Any customer not adhering to equitable payment terms likely needs to go.

You’re offering market terms to customers and should expect the same in return from vendors. Negotiating market rates or better terms will help you optimize cash flow.

How do you know what the market rate is? Benchmark your publicly traded competitors. Their SEC filings illuminate their full conversion cycle. Then, adhere to the agreed-upon terms. They’ll earn you additional credit and yield more favorable terms in the future.

There may be times when you feel compelled to pay early. Without a favorable impetus, this increases your cash float. Implement an automated system to monitor your procure-to-pay processes to ensure you’re optimizing efficiencies and cash flow.

Cutting overhead can be low-hanging fruit for cash flow optimization. Sometimes, this might require an initial upfront expense, but it’s usually more than worth it if the adjustment will save you money in the long run. Go ahead and model it out (#FactsNotFeelings). Whether that’s automating, leveraging gig workers, or establishing rigorous productivity standards, there are creative ways to optimize overhead, mitigate expenses, and reduce cash outflows.

What about inventory? Great question. How much inventory are your key competitors carrying? How many days of inventory should you have on hand to manage your production cycle and pipeline? And how are you managing it? Manual counts?

There’s a better way. Great software helps you:

• Avoid tying too much capital in any single SKU
• Determine when it’s better to buy in bulk or order on demand
• Decide when to cut an underperforming product
• Figure out how to rotate items for clearance
• Understand seasonality and demand patterns

Don’t rely on old school inventory management systems (ledger paper, the back of the napkin, or an Excel spreadsheet on someone’s hard drive).  Invest in something that provides a real-time view of stock and where you’re keeping it.

Cash flow optimization helps you understand that every dollar is not necessarily the same. You can’t simply track all money as income or outgo.

When you have different divisions and revenue streams, you need to create separate line items in your chart of accounts to better understand the ebbs and flows.  The more intentional you are with recordkeeping, the better you can optimize cash flow.

The magic of cash flow optimization starts with financial forecasting. Plus, of course, a good 13-week rolling cash forecast.  Robust data helps you project your performance and allocate capital much better than “going with your gut.” When you get it right, forecasting becomes fore-cash-ting, making you the master of your cash flow.

You’ll need to regularly compare actuals to estimates to determine what adjustments need to be incorporated into your methodology. The goal is to garner real insights from your forecasts, not just complete an exercise. It might feel a bit overwhelming, but your Fractional CFO can help.

Doesn’t forecasting cover scenario planning? Well, sort of. Forecasting helps you see what to do when everything sticks relatively close to normal. However, we also need to hedge for the worst-case scenario, just in case.

This isn’t just about having emergency savings. Scenario planning provides a contingency for unexpected events, such as bank failures, government lockdowns, regionwide communications outages, and the like.

Best of all, this strategy allows you to remain proactive rather than reactive, coming out stronger on the other side.

You’re smart, so you get it. Cash flow optimization is essential to helping your business thrive. But with your existing breadth of responsibility, it might feel untenable.

We’re here to tell you that it’s not! Take a deep breath, a sip of your Don Julio 1942, and give us a call at The Williams Stanley CFO Group. Financials are what we do all day, all night. We’re here to help visionaries like you transform your business into the wildly successful company you’ve always known it could be.