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Cash is King!



In the mid-1980s, the Australian tennis player Pat Cash was a good tennis player. But he knew he could get better. So, he worked on his forehand, backhand, volley, serve and overhead. He also improved his fitness and started to prepare himself mentally for upcoming matches.


Then in 1987, Pat won Wimbledon. Cash is King!


It is a similar tale for many businesses and SMEs. They are travelling well but they could be better if they focussed more on key aspects of their business. And here is the segue – one of the most important business metrics is Cash Flow!


As a finance professional, you can assist your SMEs by working with them and analysing Cash Flow. There are seven key financial drivers you can look at.


The first three are drivers that relate directly to cash flow:

  • Debtor days: The shorter the number of days it takes customers to pay, the better the use of cash. If debtors are increasing more rapidly than sales, and credit terms remain the same, your SME business client could face a cash flow problem.

  • Stock / Work in Progress days: Keeping track of the cost of holding stock helps to monitor potential overstocking or buying stock that is not selling.

  • Creditor days: When a business is paying suppliers faster than customers are paying them, it can cause a squeeze on cash. Setting and negotiating better payments leads to better use of cash.

The other four drivers relate to business profitability:

  • Price: Increasing or decreasing the price of goods is a direct cash influencer. Monitoring margins helps determine if profitability is reducing and prompts action to price movements.

  • Volume: Sometimes, selling more can create cash flow issues, because the business must fund that sale, often well before the customer pays.

  • Cost of Goods Sold: Negotiating or restructuring the cost of goods — for example, buying in bulk or reducing waste — can have a real cash impact.

  • Overheads: These monthly expenses may be for the same items, however, can vary from month to month, so they require monitoring of actual versus budget to keep a handle on operating costs.

Do you want to help your SME clients improve their game? Then help them focus on their cash flow, use appropriate finance mechanisms, and see them rise to the top.


The Business Finance Certification positions you as an SME Finance specialist, so you can help your clients succeed and prosper. For more information go to https://www.elevateb.com.au/business-finance-certification

© 2019 by elevateB. 

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