Why cash flow is so important for your business

What salespeople can do to improve cash flow - 4 October

Hello Subscriber,

Most salespeople in selling roles understand that profit is an essential element of business success. If a company is selling lots of their products and services but making little or no profit, they’ve not got a bright future!

In contrast, a lot of salespeople are relatively unaware of another critical component of a company's financial health.

Cash flow!

Cash flow is one of those topics where a person’s experience can have a huge impact on the level of their knowledge. If somebody has any experience of running a business, they will be VERY aware of the significance of cash flow.

What is cash flow?

Dry and technical definitions of cash flow speak about the cash that comes into and out of a business in a particular period of time.

In the real world, cash is the lifeblood of a business. Without cash available to pay bills when they’re due, a company is doomed, even if they’ve been achieving very profitable sales.

A company might have full order books for highly profitable business in the future. But if it can’t pay today’s bills like salaries and suppliers, the company is insolvent and cannot continue to trade.

This means that salespeople MUST pay attention to WHEN payments will be made. It’s not enough to focus our attention only on profit margins when working with customers.

If a customer asks you to extend their payment terms, perhaps from 30 to 60 days or more, please be aware of the impact.

How would you feel if your company suggested to you that you wait an extra month or more for your salary or commission?!

How to be best buddies with your finance team!

Now that you’re aware of the importance of cash flow, you can remember to agree on all aspects of payment terms whenever you’re selling.

When your colleagues in finance are reporting financial performance, one of their key performance indicators is “debtor days”. This is the number of days that represents how long, on average, your customers are taking to pay. I firmly believe that the responsibility to agree to these payment terms is the responsibility of salespeople, not their colleagues in credit control.

Yes, of course, it’s people in finance and accounts who determine policy and ensure that the cash is collected. But it’s their colleagues in sales who have the greatest opportunity to manage everybody’s expectations about when payments will be made.

If you can develop a reputation within your business as being on the side of your finance colleagues, they’ll love you! This can be a great place to be when you do come across the occasional time when your customers are asking for terms that are out of the ordinary.

Here’s one area of practice to emphasise today

In all of your conversations with customers today, keep in mind the need to protect your company’s cash flow. Become best buddies with your accounts team!

Coaching Focus

  1. Review your customers’ payment history. Ask your colleagues in finance to take you through the data. They will be VERY happy to have you on their side!

  2. Spend some time with your sales coach or sales team leader in role play about how to improve the payment terms agreed upon with customers.

If you have questions or comments, it would be great to hear from you. Just hit reply and send me an email.

Have a great day!

Founder & Leader

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