Strategies to Address Negative Cash Flow

If you get on the wrong train, Get off at the next station. Even if it's uncomfortable. Even if it’s embarrassing. Even if it means starting over. Because the longer you stay on the wrong train? The more expensive the return trip becomes. And in business? That train is often: ❌ A bloated team ❌ An unprofitable service ❌ Clients who drain more than they pay ❌ Spending with no return You don’t fix cash flow by hoping it works out. You fix it by facing the hard truths early. Here’s how to get off the wrong train, fast: 1/ Audit everything – Not just what you spend – But what you actually earn 2/ Know your breakeven – Cashflow clarity > revenue vanity – Growth without margin = chaos 3/ Drop what drains – Unprofitable clients – Services that cost more than they return 4/ Build cash reserves – Give yourself room to pivot – Emergencies shouldn’t erase momentum 5/ Keep expenses lean – Especially in growth stages – Every dollar should have a job 6/ Review monthly – Cashflow isn’t “set and forget” – Stay close to the numbers 7/ Ask: Is this train taking me where I want to go? – If not, get off. – Fast. Cash flow issues don’t start big. They start quietly. Don’t wait till the next stop is failure. Get off. Re-route. And build something that sustains the journey. Follow me Marc Henn for more. We want to help you Retire Early, Supercharge Your Cash Flow, and Minimize Taxes. Marc Henn is a licensed Investment Adviser with Harvest Financial Advisors, a registered entity with the U. S. Securities and Exchange Commission.

The client owes you $100K. You owe vendors $50K. Both are due this Friday. Guess what usually happens? The client pays late. The vendors want their money now. This is the AR/AP trap nobody warns you about. The reality for most mid-market companies: → Average AR days: 47 → Average AP days: 30 → Cash flow gap: 17 days of operational funding needed This silent cash flow gap creates a perpetual working capital shortage that worsens as you grow. As a CFO, I see it all the time: Businesses focus on sales and margins, but neglect the timing gap between collections and disbursements. And often, this timing gap is bigger than their profit margin. The quantifiable impact: - Each day of AR improvement = 1% annual cash flow boost - Missing 2% early payment discounts = 24% lost annualized return - Damaged vendor relationships = higher costs and tougher terms The liquidity equation is simple: → Beginning cash + collections - disbursements = ending cash But execution is where businesses fail. Top-performing companies do this differently: - Enforce clear invoice terms - Start systematic collections before the due date.  - Implement strategic vendor payment scheduling - Track cash conversion cycle metrics at the executive level. Cash flow management isn’t bookkeeping. It’s a strategic weapon for building enterprise value. What specific cash flow gap is holding your company back? Follow Amit Kumar for more insights on accounting and finance. #accountspayable  #finance  #accountsreceivable

When you have cash flow problems do you: >>look for various bandaids? >>Or find the root cause and uproot it forever? Clearly the forward thinking CEO or business owner should look for the root cause. There is ONE root cause of negative cash flow for professional and business services firms. Uproot it and eliminate negative cash flow forever. The cause is your Terms and Conditions. Terms and Conditions (T&C) are part of every contract, agreement, or purchase order. T&C spell out the total price/fee and when that fee is to be remitted. It’s the timing that makes the difference in cash flow. The only way to guarantee positive cash flow is for the payment to be in advance of any work. If suitable, you can allow installment payments on a predetermined schedule—but every payment must be made before the work resumes each month or payment period. Why is this hard? If you can’t tell the buyer the fee or price, they can’t pay in advance. That forces you to choose a pricing model that determines fees in advance. My preferred pricing model is IMPACT Based Pricing. You may choose value based pricing or flat or fixed fees. If you don’t have a pricing model that sets fees in advance, you are doomed to negative cash flow. No bandaids will help. This is your decision. You might think “everyone” in your industry charges in arrears (after the work is done) but you’d be wrong. I’ve worked with people in many professional and business services industries who set the fees in advance. (DM me for specific examples.) My own story is like that. In 2010 I was facing a stack of outgoing invoices and a bigger stack of bills to be paid. Since I was charging by hour, I was invoicing clients in arrears. Of course my bills couldn’t wait. The gap was huge. A bandaid wouldn’t close it. I committed to IMPACT Based Pricing. There were some objections from clients; not everyone agreed. Many did. I promised to deliver the life changing differences they needed for a predetermined fee. Most jumped at the offer. Those who did would be delighted. Those who didn't weren’t good fit clients. My firm, and my clients firms, have never again had a negative cash flow problem. They take 2-3 months to transition to a predetermined fee pricing model and revise their terms and conditions. T&C must include: >>Exact payment dates >>Exact payment amounts >>Payment method: ACH/EFT from their bank to the provider’s bank or credit cards. >>If a payment is not received the work does not begin or continue. No exceptions. >>Payments are not contingent on meeting milestones or any condition that the provider doesn’t fully control. Don’t make the last payment “upon completion.” 1)  if ANY of it requires their participation, they can delay and you’ll never get paid in full; and 2) you're right back in the negtive cash flow position. DM me to discuss uprooting negative cash flow forever. #negativecashflow #fractionalexecutives #professionalservices #businessservices

Businesses die when they run out of money. There is one tool to survive a cash crisis. The 13-week Rolling Cash Flow Forecast 🧵: It is a simple spreadsheet. To forecast your cash precisely by the week. For 13 weeks -- a short enough time to be precise. And just enough time to get ahead of problems. Here’s the Excel template I’ve used (link at end): Step 1: Start with this week. Enter this Monday’s date. We have a column for this week and the next 12. Step 2: Income Fill in your current starting cash on hand. Then the cash coming in this week. Step 3: Expenses List the cash that’s going out from operations. Like rent, salaries, fees, or loan payments. Step 4: Ending cash position Each week, start with the cash on hand. Bring in some more cash. Spend some. Then see what's left for next week. We want our cash to stay above zero. No cash = no business! Steps 5 & 6: Accounts Receivables and Payables Receivable = money owed to us (suppliers) Payable = money we owe (vendors) These are often on terms (like net 30), so we want to forecast when they must be paid We enter current & new ones, and due dates That’s the basic idea. You update things for the next week and beyond. Revise each week and delete the first week. So it’s always up to date for the next 13 weeks. And you can now try to avoid running out of cash. Usually, you're here because your bank account is nearly empty! So now… Your job as CEO is to stretch your cash: •Delay payments •Renegotiate w/ vendors •Expand borrowing •Raise cash •Get paid early •Etc. Buying time to fix the problems that got you in this mess! I am using this spreadsheet format now. In real businesses. As the economy gets worse, more of us will need it. You can find the spreadsheet free on my site at: girdley dot com slash 13weeks