Cash is KingJul 18, 2019
According to Wikipedia, the origin of ”cash is king” is not clear. It was used in 1988, after the global stock market crash in 1987, by Pehr G. Gyllenhammar, who at the time was Chief Executive Officer of Swedish car group Volvo. Cash is King Wiki Link
We might not know the exact origin of that term we’ve heard so often, but I can tell you first-hand, I know how it feels when cash is tight in business. For many owners, it’s can be the most gut-wrenching part of business ownership. It is one of the primary areas of focus for many restoration company business coaching clients. Many years ago, I wanted to do whatever to eliminate that type of worry from my life so I developed and refined systems to help insure our restoration business was always in a healthy cash position with plenty of safety net to back us up in times when money was tight.
Here are 7 of the high level elements of a strong plan to create healthy cash flow.
- Full Scope. It may sound obvious but fully scoping the work is critical to maximizing profitability and cash flow. Equipping your technicians and project managers with the right tools to do a great job of fully scoping the loss, capturing every special request and change order is critical to profit and cash flow.
- Rapid (and Progress) Invoicing. Have a goal of getting invoices out within 1-3 days of completing the work.
- Acceptance of Estimate. When an estimate is submitted, have a system in place for follow up. Everyone should know who is responsible at every point in the process. Was it reviewed and rejected? How long did it take your office to respond to the rejection?
- Follow Up. At what time interval are you following up with the TPA, adjuster, homeowner, property manager. What’s too much and what is not enough?
- Advances. Don’t be afraid to ask for advances and draws. Other companies are practicing this, you should too.
- Mortgage Company. We all know the mortgage company can really slow things down. Is your dedicated collections person working with the mortgage company or do you leave that to the customer? Many times, if left to the customer, the calls don’t get made and you are left waiting for payment.
- Home Owner. Get the home owner involved in the process. Have them call their mortgage company. Ask them to give their insurance company a friendly nudge to get payment out to you. It’s a fine line when you want to protect the relationship you have with the insurance company but at the end of the day, you know your business needs cash to stay healthy.
How would you rank your business in terms of cash flow? From your gut – how is it? From a pure analytical perspective how are you doing? Are you measuring DSO (Days Sales Outstanding) or are you using one of several other metrics to monitor your receivables? If you’ve been to a recent restoration conference, you’ve probably had some conversations on this topic – take a look at the latest version of our Restoration Conference Action Plan Workbook – you might find it really helpful.
I help owners of restoration companies with Cash flow, Team Development, Delegation, Sales, Profitability, Exit Planning and more through a business coaching relationship and specific time-tested tools and strategies. Let’s have a conversation – I can help. Click to Schedule a call with me below.
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