www.businesstransformationtools.com podcast : Cash Crisis

CASH CRISIS

There is variability in life. Be paranoid (do not stay still, move on) do not be hysterical (do not afraid of making mistake).

Assumptions of who you are:

You are spending only necessary money.

You are paying your suppliers COD (charge on delivery).

You have not bankrupted yet.

You are motivated.  

Cash survival phase

It is more important to survive than being profitable.

Consider shorter periods like dayly, weekly.

Cash speed matters more than cash amount.

Do not sacrifice future for today; no lay off, no machinery sales, no closing down.

Offer your customers a discount for early payment, means faster cash speed. Do not beg, show a plan. Do not go to mega customers first, do not try if you do not need it
Offer suppliers a plan to purchase smaller batches and late payments for a limited time. Do not beg, show a plan. 

Offer partial salary payment to your employees. 

If required consider partial payment for some bills. 

Do not buy anything more than necessary for your constraint

Do not let any discretionary expenditure without your explicit approval. 

Consider open source free softwares to save licencing costs. Cut all consultancy, coaching fees.
Factor receivables; tiny cost, no hassel, very fast incoming cash, not for all precious customers.

Loan leveraging; find a loan for a more profitable short term Project (benefit > cost) and pay it back immediately

A dollar in this week is better than 4 dollars in three weeks, we are in crisis, speed is cruical. 

Utilize finished goods inventory; do not sell all of them if you do not desperately need that cash, save sone of it for future murphy incidences. 

Do not use least unit cost mentality. Own your dashboard personaly.

Form a small cash team. Explain the situation, let them feel urgency.

Perform regular and frequent standing in front of cash board action review meetings.

Do not get analysis paralysis. Move on and feed back. Do not add on any data other than cash.

Emphasize dock to dock speed. Forget keeping everybody busy, forget local efficiencies. Reduce batch size.

Approximately right is faster than preciesly wrong. Move on ! Try to stay as lean as you are now, focus on flow, leave local optima mood. 

Determine total cash requirement for next 7, 30, 90 days.

Compile from various resources. This is your red line to cover weekly, mark it on a graph.

Suppose your minimum weekly expenses are 10.000 USD and  you have 20.000 USD at bank than it means your deadline is 2 weeks.

Mark your deadline on the graph. 

Keep constraint running and target your revenue as your green line and mark it on the same graph.

Have a public meeting. Email is not communication, it is just a follow-up.

Face to face meeting, max 10 minutes, explain the situation and severity, no promises, a few examples (sharpen your pencil rather than buy a new one). 

Prefer the goods with higher cash speed rather than more profitable ones. Stop to try sell other stuff right now.

Use extra cash to buy more raw material or services to sell more of selected fast cash returned goods.

If you have enough raw material for the constraint and your constraint is up and running for all available time than you have finished this survival phase. 

Cash rescue phase

Balance your product mix with fastest cash speed products and profitable products. 

If you are above green line then this phase is over, go for turnaround phase.

Cash turnaround phase

This is the time to switch from cash speed thinking to profit thinking. 

Keep TOC mentality running.