I was the Keynote Speaker at the Bluebulb Financials Limited Mid Year Management Retreat to discuss structure, culture and digitization as they build a high performance organization and one of the major points that we discussed extensively was receivables, and I said SELL ON CASH, BUY ON CREDIT, EVERYTIME YOU CAN, AS MUCH AS YOU CAN.
In a high inflationary environment, the cash you have today is more valuable than the cash you will have tomorrow or next month or next year. You need your businesses structured in a way that maximizes payments in advance from your customers and payment in the future from your suppliers. Collect as much cash as you can today, and pay in the future, as much as you can.
And when you collect this cash, keep it, invest it, be as frugal as you can. Most businesses that fail do not fail because they are unable to generate revenue. Many of them even do not fail because they are not able to generate profits. If you check the books of many of these companies, revenues are good and growing, profits are decent and growing, the issue is hardly about revenue or even profits on paper. In most cases, the challenge is cashflow, and one of the smartest ways to improve and grow your cashflow is this - SELL ON CASH, BUY ON CREDIT.
When I see a company’s revenue growing, I am excited to quickly check their levels of account receivables and profitability; and when these two are in good shape, I move to their cashflow. Of course, customers will ask for credit and suppliers will ask for payment in advance. It is your job and mine to ensure that we create the most efficient and the most optimal scenario. Not all the time will you be able to sell on cash or buy on credit but if you make this your goal, your northstar, you have a greater chance of success than those who do not consider this at all.
It is another great week and I wish you a productive and cash rich week ahead.