Ten Ways to Move Cash (Working Capital Part 4)

# Ten Ways to Move Cash (Working Capital Part 4)

In Part 1, we covered why working capital is cool again now that money is expensive. In Part 2, we covered why it is a team sport and why financial literacy sits with the Chief Financial Officer.

Part 3 is the levers. How do you move cash? What can help today if you find the challenges are piling up? Last, we talk about managing it.

Now we talk mechanics in Part 4.

Most leaders under cash pressure reach for the same two levers. Chase receivables. Delay payables - both work. Neither is a strategy.

Bottom line: cash hides in three places. Coming in, going out, and stuck in the middle. We remind you of the ten levers because most businesses pull only a few.

Here they are.

Speed up cash coming in

I once sat on a panel where a “CFO” said clients struggled to hold money, so they should bill less frequently.

First, if this is the mantra of any finance leader you pay, stop. That was the worst advice I’d ever heard and one that paints Finance Leaders as useless and not understanding business.

There are many reasons cash doesn’t come in fast, but speeding it up is always best. A dollar in your pocket is worth more than one tomorrow. This is the basic time value of money concept that you learnt in late high school or early university.

That was some time ago, so let’s remind ourselves:

The time value of money is the idea that a dollar today is worth more than a dollar in the future.

Money in your wallet is money you can put to work to earn more money. Money changes value with time because of earning power, inflation and risk.

For a business, cash on hand can earn interest, but it's more likely to be used to pay expenses or make investments. When you don’t have cash, you may have to borrow and incur interest costs. That’s Earning Power.

Next Inflation. We all know prices go up. Except ours never do as quickly as our vendors and our payroll do, do they? Inflation hits small and medium businesses harder than anyone, including households.

Lastly is risk. This is a big one for us in business. Collections, floating the cost of the service or product in the meantime, and the emotions and decisions of our customers all impact our cash flow. The future is uncertain, and so is whether you'll ever get paid at all.

So don’t underestimate and don’t take ridiculous advice. How quickly money comes in matters for every business.

1. Invoice on schedule.

This is the cheapest cash you will ever find.

Every day between finishing work and issuing the invoice is a day added to your collection cycle. It costs almost nothing to fix.

If you are batching invoices to month-end, you are financing your clients for free.

Worse, if you invoice when you have time or feel like it, you are digging your own hole.

Bill on completion. Or at least on a schedule. Even better, on retainer.

This is not an area where emotions and capacity should drive execution.

Remember in Part 1 when I gave the “dumb example”? Revisit it because there’s more than working capital at stake when it comes to timely and consistent invoicing.

2. Take deposits, charge on retainer or bill on milestones

Collecting before or during delivery beats collecting after.

Deposits. Retainer-based billing. Progress billing. Milestone payments.

Your sales team will tell you clients will not accept it. Some will not. Many will, and nobody has asked them.

3. Negotiate terms as hard as you negotiate price

The same contract value on net thirty versus net sixty is a materially different deal.

Sales teams are measured on price and volume. They are rarely measured on timing. So timing gets given away in the final round of negotiation because it feels free.

It is not free. Put terms in the deal review.

We were once taught that pricing negotiations come down to three things: scope, timing, and cost. Each time you revisit your price, remember that, and if one changes in the customer’s favour, be disciplined with an offset. Your cash flow will thank you. And it establishes a healthy give-and-take with those you do business with.

4. Remove the friction from paying you

Look at how a client actually pays you today.

Can they pay online? Is pre-authorized debit an option for recurring work? Do you take credit cards on smaller balances and waive the fee for faster cash? Does your invoice show the due date clearly and name the person to call?

Friction is a collection problem disguised as an administrative one.

Donald Miller says make the cash register easy. And if cash matters, that makes sense.

The number of times a collection outreach is met with shame and apologies because they didn’t get the invoice is crazy.

5. Run a collections ladder, not a chase

Not everyone will honour your terms. Plan for that before it happens.

Build a defined escalation. A reminder at a set number of days. A second contact with a different tone. A call from a named person. Offer a payment schedule when the relationship is worth protecting.

Communicate expectations during the sales cycle, not the day the invoice goes late. A client who knew the terms up front is far easier to collect from.

Smooth the cash going out

Next up is getting control of your outflows and using the opportunities to help you forecast and manage your liquidity.

6. Pay on a schedule, not daily

Paying invoices as they arrive creates inconsistency and makes outflows impossible to track.

Remember, we are convincing you in Part 4 of this series how strategic cash flow forecasting is. Yet, this bad habit is the first one to make it an exercise worth abandoning.

It is nearly impossible to track cash flow if payments are ad hoc, daily and based on the bank balance.

Move to a payables run - weekly or every two weeks. You get a predictable forecast, vendors get reliability, and your team gets hours back.

We often recommend offsetting the payables run with payroll. That way, you smooth the workload and the cash impact.

7. Ask your vendors for terms

Most businesses never ask.

Ask for extended terms, quarterly instead of monthly, or a payment plan on a large purchase. Vendors who want your growth will often say yes, particularly when you have paid reliably and can show them why.

And when the money genuinely isn't there, an early conversation and a plan protect the relationship.

Silence destroys it.

Much of what we said above on inflows works in reverse - especially terms. Negotiating better terms can matter more to your cash flow than a lower price. Yet far too often we look only at the total owed, not the timing.

And friendly reminder - when you get the terms, use them. Schedule payment as late as the contract allows. Preferably still on time.

8. Time large spending against the forecast, not the budget year

Capital expenditures, annual software renewals, marketing commitments, hiring.

These get scheduled against the calendar or the approved budget instead of against the cash curve. Remember we looked at how a billboard contract paid upfront for a year, and a digital ad spend that bills as it runs can cost the same annually and do completely different things to your cash.

Same cost. Different decision.

Free up the cash that is stuck

9. Bill your unbilled work

In project-based businesses, this is usually the biggest number nobody is looking at. Go back to the invoice schedule above and the impacts beyond working capital in Part 1.

Work in progress that has been delivered but not invoiced is cash sitting in a spreadsheet. Change orders that were never processed. Time that was never approved. Milestones that were hit but not triggered.

Find it. It is already earned.

Similarly - go collect. If you have receivables, get on top of them. The only thing worse than not being paid for work performed and unbilled is not being paid for work that’s both performed and invoiced.

10. Get the credit line while you look good

Operating credit is cheapest and easiest to obtain when you do not need it.

Secure facilities from a positive cash position with clean records and a current balance sheet. Terms negotiated in strength are nothing like terms negotiated in distress, and a business without proper financial records will struggle to get either.

This buffer stops the other nine from becoming urgent. We talked some about it in Part 1. Too often, growing companies wait until the growth demands it, and by then the banks see the challenge and not the opportunities that are the drivers.

The takeaway

Cash in. Cash out. Cash stuck.

Most organizations work one or two of these and call it cash management. Ten levers exist, and the ones nobody is pulling are usually the cheapest.

Pick the three you are not using. Start with invoicing speed, because it costs nothing and the results show up within a month.