How Do Your Sales Process Steps Affect Cash Flow?

cash flow

What if your sales process steps overlook the importance of cash flow to the detriment of the company’s overall health?

I’ve noticed that the missing piece from too many sales processes is how to ensure that effective cash flow is an outcome of the sales process you use. What good is high sales volume if you have no cash to pay the company’s bills?

A small medical device manufacturing company we’ve consulted with was in dire straits because they were sales rich and cash poor. In their early years in business they fell into the habit of delaying their receivables until orders shipped. Their own suppliers of raw materials required payment up front or within 30 days. There was typically a 90-day lag between what they paid out and what they took in.

The time to address cash flow is during your conversation about terms and conditions. Your buyer is enthusiastic about the value they’ll derive from your services. They see a bright or improved future. They’re excited to get started. That is the time to be clear and matter of fact about your payment terms.

The single most important term is the timing of the payment. If it is anything other than upon signing, you’re heading for cash flow trouble.

Should the Buyer Care About Your Company’s Cash Flow?

They don’t and they shouldn’t care about your company’s cash flow—except how it affects your ability to fulfill the promise you are selling.

If your company can’t deliver the value they’ve bought due to poor cash flow, that becomes an important issue to the buyer.

Top 5 Tactics to Ensure Positive Cash Flow

Integrate these cash flow tactics into your sales process steps: every prospect, every offer, every sale.

  1. Understand your company’s sales cycle. The sales cycle is the period from the time of the first inquiry to the delivery of the service. For many services companies, this is a few days to a few weeks, for others it may be months. Each sales cycle requires terms and conditions that reflect that cycle. There is no one-size-fits-all!
  2. Focus on the prospect’s timing and delivery desires early in the conversation. This may be part of the qualifying step. Be sure to connect your company’s ability to meet the buyer’s needs to the timing of their payment.
  3. Reward buyers for completing the purchase, including payment, sooner rather than later. You can increase cash coming in during a normally slow period.
  4. Ensure that each strategic statement includes the right profit for that specific value and buyer. If you aren’t requiring a profit from each sale, you’ll cause a negative cash flow (i.e. sales rich, cash poor).
  5. Identify anyone in your company who puts a drag on your cash flow. Who or what puts a drag on cash flow? Often, it’s the legal department or procurement or another back-office team. They don’t see the buyer; they aren’t immersed in the cash coming and going. They cannot be allowed to layer their delaying tactics on top of a purchase agreement which then slows down the sales cycle including the timing of payment.

The CEO or Owner must take the lead on the conversation about cash flow. Positive cash flow should be a subject everyone wants to talk about and make happen, including but not limited to, the sales team.

Don’t wait until you’ve maxed out your credit, been denied more credit from a lender, and have to slash expenses, because you have no cash.

Cash gives every company superpowers. When you’re ready to accumulate cash to build your company’s superpower, we’re ready to help. Give us a call for a complimentary conversation about how your company is currently handling cash flow. 703-801-0345.

Author bio: Since 1999, Susan Trivers and Trivers Consulting Group have helped more than 500 companies achieve dramatic growth: $100 million for technically unique airmasks for military pilots; triple revenue and 15% fewer hours worked for CPA firm; increasing number of referrals for “one and done professional” services providers; double fees and cash accumulation by many niche consultants and subject matter experts.

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