Managing your company’s cash flow is crucial to keeping your business afloat. A strong understanding of your cash flow ensures you can cover all of your expenses and keep your company financially healthy, even in the midst of tough economic times.
In this installment of CO— Strategy Studio, Danielle Thieret, Founder and Chief Fun Officer of We Crush Events, and Tom Kelly, Director of Analyst Relations for Oracle NetSuite, shared some best practices and tools for cash flow management, as well as how cash flow can impact a business’s sustainability and future success.
How to monitor your cash flow
One of the most important ways Thieret monitors her business’s cash flow is by using a CRM. This is especially useful for her business because of the number of event managers she works with across the country.
“We have an incredible group of event managers across the U.S. that are remote, and they are responsible for managing each of their individual events and bookings,” she said. “Each event is essentially a project where they are in charge of booking those venues and vendors and managing and helping receive those client payments.”
When conducting business with so many different vendors and clients, you must organize the information in a central location, like in a CRM, to ensure you aren’t missing any key data.
Additionally, Kelly stressed the importance of making sure you’re collecting cash on time from clients, so you aren’t left with a negative cash flow at any point.
“Come up with creative ways … [like] memberships or [subscriptions], where you are literally charging the credit cards every month,” he said. “It’s a matter of [setting up] an annuity-type cash flow you can somewhat rely on.”
Business health and performance metrics
Forecasting your finances can help you get a picture of your business’s future cash flow and anticipate potential issues. Thieret recommends reviewing your sales metrics to make the most accurate projections possible.
“The biggest game changer for us was understanding our sales metrics and knowing them inside and out,” said Thieret. “We know our conversion rates by company [and] by individual, we know our recurring revenue percentage, we know the timeline from call to a deal … That data gives you essentially peace of mind and a math formula to be able to make [accurate] projections.”
Thieret added that her company’s projections have been “pretty spot on, with only a slight variance because we learned our sales metrics and understood that formula.”
“Your sales metrics may evolve and change over time, but just start from somewhere,” she said. “Start learning [and] take your best guess.”
The next step to using your metrics is “mechanization,” said Kelly. He noted that many of Oracle NetSuite’s customers aim to get all their front- and back-office business systems onto a consistent platform. He stressed the importance of ensuring consistency on both ends of the system without any interpretation, configuration, or changing of that data.
“A CRM … [should be] counting and making sure that that information is not only flowing on a real-time basis but is actually the same data,” Kelly added.
Tech to help keep track of finances
The right technology can be helpful when measuring and staying on top of your finances and even daily transactions. Kelly recommended keeping track of your cash flow on a daily basis by using the tech available.
“A lot of the technology that’s out there today … can connect things like your bank account and your payroll provider … [which will] make the heavy lifting somewhat easier for you,” he said. “There’s plenty of technologies … that can … give you that quick snapshot on [where you’re at] from a business standpoint.”
Tools like online banking, business management/financial software, CRMs, and other technologies can make all the difference when it comes to managing your cash flow. In fact, Thieret said her company “lives and dies” by its CRM.
“For us, it’s really a financial tool to have great visibility across the company and to keep our cash flow in check,” she said. “It really ties all of our financial data into one place and allows us to effectively manage and operate through all of our remote employees.”
Article Courtesy of CO by the U.S. Chamber of Commerce.