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  • Writer's picturePaula Waggoner-Aguilar

How to Improve Your Cash Flow from Operations

Updated: Apr 3, 2023

If you’re struggling with cash flow in your business, it’s time for a change. Cash flow is the lifeblood of any business. It’s what ensures that you can pay your staff and bills on time, and it’s what allows you to grow your business and expand into new markets.

It’s also one of the most overlooked aspects of business. Learning how to improve cash flow in your business is a key component of being a successful business owner.

Here are five ways private companies can free up or generate more cash during these times.

#1: Re-evaluate your current business model

Before making any changes, it's important to get a firm grasp of your starting point. To do so, spend some time with your leadership team. Revisit your current business model and examine the following:

  • Business activities that currently generate revenue

  • Essential resources including talent, credentialing or licenses, know-how (intangible assets – contracts, supply side relationships, intellectual property), software, equipment and facilities, and materials.

  • Your value propositions

  • Customer relationships

Based on your current model, is there a need that you aren't currently focused on that you could ramp up quickly and market to customers? Could you diversify your business and offer customers a product or service in a different sector swim lane? Outside of healthcare markets – life sciences or chemicals or another industry? Alternatively, could you offer a product or service that requires little work to a customer, such as a vertical market upstream or downstream of your existing business?

One tool we use for these strategic reviews is a SWOT Analysis.

As you run through the evaluation with your leadership team, keep these questions in mind, and look for ways to pivot and start generating more income quickly. The Healthcare CFO is actually the result of a pivot by our founders made during 2015 from another unrelated technology driven industry. We have firsthand experience re-evaluating business models and successfully pivoting into and navigating new markets.

To learn more, go to our Strategic Advisory services webpage.

#2: Manage customer credit and receivables

One of the most effective ways to improve cash flow is to focus on managing customer credit and receivables.

  • Do you have a process for approving new customers, reviewing their credit history, and establishing credit limits?

  • Does your organization have established payment terms consistent with current industry standards? How about early payment discounts or late fees?

  • Does your leadership review Aged Accounts Receivable periodically and coordinate or assist with collections to keep customers current?

  • Do you link accounts receivable and collections metrics with management performance?

Check out our Cash Forecasting services for help with managing your working capital.

#3: Reduce operating expenses

Reducing expenses unlocks cash flow and improves profitability. Examine your current operating services to see what you could outsource without compromising quality and customer service. Start with areas that are pain points and/or where you lack expertise. For example, utilize our Outsourced CFO services in lieu of hiring someone full-time. With the money saved, you can redeploy your cash to improving your accounting technology and/or hiring a full-time accountant. Outsourcing saves, on average, 1% to 3% percent in gross margin. It can also improve cash flow and eliminate the headaches of your ongoing attention to certain aspects of the business.

The Healthcare CFO offers several outsourced services including monthly financial planning and analysis. Included in this bundle is our keystone Monthly Financial and Operational Review or MFOR™ process that we conduct via Zoom in one hour sessions. As part of the MFOR™, we pull your financial and operation data, prepare reports utilizing the latest cloud financial software and data visualization techniques, synthesize information to provide you with insight, discuss your company results, and recommend action plans. Bottom line, we deliver a reliable higher quality and more cost-effective service than our private clients can.

In the case of independent physician/medical practices, we offer a one-of-a-kind Physician CFO service to help you run a profitable $1M revenue to $15M revenue practice. We use our resources, technology, and know-how to bring down the high cost of having a CFO team bundled in a fixed price monthly service and taking only an hour of your time. One-on-one personalized service.

#4: Reengineer business processes

You can reduce your cost of goods sold (COGS), operating (Opex), general and administrative (G&A) expenses by targeting high volume, low-value work opportunities. This type of blocking and tackling is what we refer to as building financial offense.

Start this process by taking a look at the business activities and associated expenses bundled in each cost category (COGS, Opex, and G&A). Ask what can you streamline, outsource, or automate? You are looking to find ways to accomplish more with less manpower.

For example, is accounting spending 3 days a month producing 5 different reports with the same data? So maybe instead of spending 36 days a year and producing 60 duplicate reports, you could look into reporting automation technology. Your business could benefit from reducing direct employee expenses, related hidden costs, and generating work bottlenecks that may be contributing to other problems. Don’t forget to factor in the cost of indirect owner time and costs associated with these business process as well as the opportunity cost of higher value work, your requests, not getting completed due to competition for time, attention, and resources.

#5: Assess remove workforce options permanently

During 2020, did your company, and particularly your administrative and functional support departments (sales, marketing, engineering, credit, procurement, finance, accounting, payroll, collections, HR, etc.) work from home? If yes, assess how effective your back office was during this time and consider using a remote work model or some hybrid moving forward. What part of remote work did not work so well - items you will want to address? Would it make sense to have select members of your work force continue working remotely at least part of the week? If so, you could potentially reduce office space requirements to generate significant savings or rent the extra space out to a smaller company.

Likewise, schedule a meeting to talk about your assessment and compensation issues for remote work with your Human Resources manager. Ask what options do you have to re-evaluate existing compensation? What are your competitors doing? If your Human Resources manager doesn't know, consider hiring someone to map talent and help you find out.

Know that there is indeed a value and benefit to employees who want to work remotely. For them, remote work is convenient, it optimizes their time (no traveling), it gives them more affordable geographic living options, it relieves stress on working parents (picking up kids from daycare or school), and it reduces household costs in terms of transportation, meals, etc.

Our parent company, The Energy CFO, has utilized a remote workforce since 2018. If you need help, we can share some ideas on how to transition to this model effectively.

4 Easy Steps To Get Started

Do you need someone to help free up your cash flow? We specialize in helping improve cash flow from operations. Contact us to schedule a Zoom consultation with our Managing CFO here. Its easy to get started.


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