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 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.
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.
