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Cash & Strategy


We all have heard the phrases, “Cash is king” as well as “He who fails to plan is planning to fail.” It is the integration of the two and the understanding of your business environment that impacts your strategic planning and growth goals for your company. The secret to financial success or wealth is to spend less than you make, i.e. profitability. However, profitability does not guarantee success nor successful growth. Understanding and integrating the cash flow cycle, forecasting cash needs, and prioritizing the management of operational cash movement is integral to setting and achieving strategic planning goals.

As the illustration suggests, cash flow and cash availability directly impacts how much a company can expect to grow and how fast. In the Harvard Business Review article, “How Fast Can Your Company Afford to Grow,” the authors outline the mechanics of the operating cash cycle and measuring how changes impact potential. Obviously other infusions of cash such as investment capital, borrowing, etc., will also impact the rate of growth potential of a company. But it is not all about having a bucket of cash.

I cannot emphasize enough the value of understanding the cash flow cycle and putting pressure on cash flor for a company in grown mode. Good understanding and documentation of cash flow and operating systems allows for key performance indicators to be used to measure performance. Growth puts pressure on company resources, mainly cash. The more growth, the more pressure and problem areas (or areas of opportunities) are highlighted. Addressing these, drive the strategic initiates and makes company managers and leaders focus on the here and now as well as the future.

Strategic planning and setting goals are not at all about setting up spreadsheets and producing projections. The engine that achieves these projections is operations and cash flow. Get to know them, measure them, and execute.


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