1. I will help my firm… increase the velocity of its cash flow
Cash is our friend. Cashflow velocity is cashflow divided by time. This may sound like consultant speak, but what this means is simple: helping your business find ways to shorten its time to receipt of cash coming in or owing to them.
The benefits of this are obvious. Faster cash flow means less need to rely on or manage costly debt, and more funds available to reinvest, hire, or otherwise put towards growth measures. It is also a highly measurable metric.
In modern financial centres payments are already happening instantaneously – it’s only a matter of time before even our most recalcitrant economic backwaters catch up. You can do your bit by paying your suppliers so they can pay theirs and those people can – in turn – pay you!
Among other ways to boost cashflow velocity is to reduce your terms of trade or even ask for up-front payment, look at your credit and collection processes, offer discounts for early payments, or look at ways to make it easier for your suppliers or clients to pay up-front, on-time, or even early.
For example, Australian fintech SocietyOne charges no penalty for early repayment of their loans where many others in the industry do. While it costs SocietyOne some money in interest payments, it also frees up capital that can then be loaned to the next borrower.
Boosting cashflow velocity should be one of the primary goals for CFOs in 2019.
2. I will help my firm… find links between operations and cash flow
Movements in cash flow can sometimes indicate operational, as opposed to marketing- or sales-related issues.
As an example, what may appear to be a quiet month revenue-wise might actually be the result of delays in fulfillment rather than slower sales.
In this case, these cash flow movements highlight a need to implement systems that ensure faster fulfilment – as opposed to launching a new sales or marketing campaign.
3. I will help my firm … pay down debt
Paying down your own business debt saves money on non-deductible interest payments. From the world’s biggest leviathans, to the humble mum-and-dad store, first managing, then paying down, debt is a great way to free up money that can be spent on wages, new plant and equipment, other operating expenses or growing your business.
Among ways to pay down debt is to look at savings you can make in all areas of your business – waste – and earmark that cash for debt retirement.
You can also identify non-core areas of your business to be sold off or closed down. Using the 80:20 rule to identify which activities rack up the most debt or generate the least profit while consuming the most resources.
Exiting personnel who are surplus to your core mission requirements is also a way to make savings.
Of course, the Holy Grail of debt management is to look at the supply side – and that generally means increasing sales, finding new markets and scaling up. Which brings us to…
4. I will help my firm… discover ways to boost revenue
The role of CFO is expanding, creating a need to think more strategically in finding new ways to optimise current business models, and find additional revenue streams while boosting productivity.
Boosting productivity can be defined by achieving the same result for less. This can be done by reducing overheads and wholesale sackings – while trying hard to not kill the goose that lays the golden eggs.
But it can also be done by reducing internal roadblocks in your company, hiring better staff, or training up the people you have, and increased use of technology – our old friends AI and automation, which by the way is heading to the CFO’s office.
One of the best ways to find opportunities to boost productivity is through continuous scanning for opportunities and risks in the business and its operational processes from the ground up by using AI, which we look at in the next section.
5. I will help my firm… work smarter, not harder
Helping your firm to implement all of the above in a fast and cost-effective manner will help your business grow, boost cashflow velocity, reduce waste, identify savings, remove roadblocks and bottlenecks, retire debt, increase sales and help you find new markets. And it’s not necessary to hire a team of expensive consultants to do this.
Emerging technologies called “expertise automation platforms” use AI to mimic human consultants, and perform low-cost check-ups on businesses to identify areas requiring transformation. These check-ups identify not just technological or operational issues, but also cultural issues around how judgment-based decisions are made. And they do this using a simple problem-symptom-cause-remedy approach.
In essence, it’s about finding smarter ways to bring value to your firm – and in doing so, to yourself also.
Niranjan Deodhar, Founder of Open Orbit