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Expert Advice for Medium and Midsize Businesses

Managing Cash Flow for Growth

More than 80% of small businesses fail due to poor cash-flow management. It’s an issue that can close the doors for even the most healthy, profitable companies.

While most owners and executives can agree on the importance of cash flow, oftentimes, they are not cognizant of the cash flow mistakes they are making that could potentially end their business.

To gain more insight on cash flow and how business leaders can make smart financial decisions, we asked a few industry experts to share their knowledge with us during our Oracle SMB Twitter Tweetchat, Managing Cash Flow for Growth. Continue reading to see what these experts had to say.

Why are cash flow issues still keeping business owners up at night?

  • Over 62% of middle market companies are concerned about cash flow management according to Midmarket Institute. When payables exceed receivables, business owners enter into a cycle of short paying suppliers.
    – Greg Wood (@TheCFOAlliance), The CFO Alliance, President
  • Your business is a car. Cash flow is the fuel that gets you from points A to B. Without fuel, you aren’t going anywhere.  When your business is behind the 8-ball, money can suddenly be VERY expensive (fees, higher int. rates, etc.)
    – Brian Moran (@BrianMoran), Award-winning Business Advisor
  • When you take your eye off cash flow is when the issues begin. The small biz owner must be a CEO and CFO. 
    – Gwendolyn Turner (@GwenFTurner), President, Princeton Proper
  • Easy: You can lose money for some time, but you only run out of cash once. Also, running short of cash is more than just the #1 cause of business failure—it’s expensive. Fees, interest…
    – Craig Himmelberger (@CRHimmelberger), Oracle, Director of Product Management
  • I think, if you’re an owner, it’s too easy to get in the red—focusing on your passion rather than the $$$.
    – Steve Cox (@The_Steve_Cox), Oracle, Vice President of ERP and EPM

What are specific cash flow mistakes being made by business owners today?

  • Incorrectly estimating the future. It’s important to be aggressive but you can’t plan based on promises. Execute on agreements. Spending money based on what "you think you need." Make value purchases that give back to your small biz.
    – Gwendolyn Turner (@GwenFTurner), President, Princeton Proper
  • Mistake #1: Cash planning off of financial reports is like trying to drive while looking in rear view mirror. Reliable forecasts depend on current and accurate ERP data but too few companies have live-connected cash and ERP systems. It’s a detail, but many companies can’t concentrate cash effectively to win better terms and service levels from banks.
    – Craig Himmelberger (@CRHimmelberger), Oracle, Director of Product Management
  • Confusing what’s billed v. what’s received. Even with a myriad of advanced payment options, cash in the bank rules.
    – Steve Cox (@The_Steve_Cox), Oracle, Vice President of ERP and EPM

How can business owners avoid falling into cash flow hell? What are some tips?

  • Think about months ahead vs. days ahead. Remember that you can set terms on invoices, but know what your customer’s terms are. They could be different. 
    – Greg Wood (@TheCFOAlliance), The CFO Alliance, President
  • Cash flow hell starts for business owners when spending their receivables BEFORE the checks have cleared their bank. Don't be afraid to be the squeaky wheel when it comes to collecting your $$. I'd rather lose a client than lose my biz. 
    – Brian Moran (@BrianMoran), Award-winning Business Advisor
  • Help! If finance is not your thing find someone who can help. If you can’t afford, barter! Find creative ways to get it done. 
    – Gwendolyn Turner (@GwenFTurner), President, Princeton Proper 
  • Start with a comprehensive list of every bank, branch, and account, and automate daily positions for 100% of your cash. Electronically download bank statements for every account and reconcile daily for accuracy (saves time at month end too). Connect cash positions to both Treasury and ERP flows and detail the upcoming week to avoid surprises. Reliable long-term forecasts set better customer credit and supplier discount terms and get your supply chain working.
    – Craig Himmelberger (@CRHimmelberger), Oracle, Director of Product Management
  • Monitor cash flow frequently & invoice on-the-go & immediately… & don’t hesitate to chase slow payers. Invoice quick and make the payment terms stick.
    – Steve Cox (@The_Steve_Cox), Oracle, Vice President of ERP and EPM

Are there certain industries that have bigger cash flow issues than other industries?

  • Any industry that has inventory of products, retail, manufacturing, wholesale distribution. Think about restaurants or retail stores. It is so hard to staff the unknown.
    – Greg Wood (@TheCFOAlliance), The CFO Alliance, President
  • Any industry where businesses can have 1 customer representing over 50% of revenue is potential for cash flow hell.
    – Brian Moran (@BrianMoran), Award-winning Business Advisor
  • Absolutely—for example, new physical plant is more challenging to finance and get flows right than rented office space. For companies with cash flow challenges, knowing who is likely flush with cash can open up cooperative opportunities.
    – Craig Himmelberger (@CRHimmelberger), Oracle, Director of Product Management
  • In my experience, [sadly] project-driven sectors like professional services & marketing agencies seem to suffer most.
    – Steve Cox (@The_Steve_Cox), Oracle, Vice President of ERP and EPM

Are there contingency plans business owners can create to avoid cash flow problems?

  • Create a cash culture. Discuss your cash situation often with those that are involved in collecting or spending.
    – Greg Wood (@TheCFOAlliance), The CFO Alliance, President
  • All SMBs should build a relationship at their brick & mortar bank location. They can be flexible if they know you personally. SMBs should have a line of credit to get through short tight spots. 
    – Marsha Collier (@MarshaCollier), Author and SMB Expert
  • Don’t wait until it’s raining to buy an umbrella. Plan in advance! If your customers are in one specific area, water for natural disasters and other instances that will affect cash flow.
    – Brian Moran (@BrianMoran), Award-winning Business Advisor
  • Plan! Put strategic emphasis on keeping good relationships with your bank, your customers, and your suppliers. Keep a keen eye on your customers’ financial situations (credit reports change!) and payment habits and expect surprises. Set sensible target bank balances and maintain them scrupulously to always maintain your cushion.
    – Craig Himmelberger (@CRHimmelberger), Oracle, Director of Product Management
  • I recommend SMBs work with their favourite bank or financial services provider to agree a line of credit *in advance*
    – Steve Cox (@The_Steve_Cox), Oracle, Vice President of ERP and EPM

Are there tech tools that can help business owners better forecast potential cash flow issues?

  • According to our 2017 Annual CFO Sentiment Study, over 70% say they are living in spreadsheet hell.
    – Greg Wood (@TheCFOAlliance), The CFO Alliance, President
  • As an SMB, your go-to should be a daily look at your receivables and P&L statement. Stay ahead of cash flow issues.
    – Marsha Collier (@MarshaCollier), Author and SMB Expert
  • Automating your financials should reduce the risk of error and help with cash flow. If you struggle with your financials, either hire someone to do them for your company or outsource it. There are very few instances where a small business shouldn't be using the cloud to run their company.
    – Brian Moran (@BrianMoran), Award-winning Business Advisor
  • Strong ERP contributes reliable operational forecasts, and a good cash management platform lets you know where you stand. Getting away from manually-maintained spreadsheets and onto automated working capital and cash management solutions is key.
    – Craig Himmelberger (@CRHimmelberger), Oracle, Director of Product Management
  •  Absolutely. Invest modern cloud software with built-in analytics, mobile & social capabilities. Seek out a vendor that innovates & thinks digital with a set of digital processes you can adopt immediately.
    – Steve Cox (@The_Steve_Cox), Oracle, Vice President of ERP and EPM

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