Situation: A CEO wants to improve management of his company’s cash flow. While this is particularly important during times of tight cash and rapidly changing market conditions, the CEO wants to know what others focus on when monitoring cash flow in their companies. How do you improve infrastructure to manage cash flow?

Advice from the CEOs:

• Track project mix and margin contribution both in part and in total. To accomplish this estimate relative contribution margins of different project types.
• Adjust sales targets and commissions to emphasize projects with higher contribution.
• Segment the company’s business model by margins, overhead, and cash flow. Set targets and drive focus on profit per “X” (selecting the proper indicators).
• Analyze contribution per direct cost factor, for example per engineer on payroll.
• Develop detailed cash budgets on a monthly or even weekly basis when times are uncertain. For example, inflows and outflows by major category tracking actual cash receipt or disbursement.
• Start with broad projections, and refine the analysis over time as the company better understands the factors that drive cash flow and profitability.
• As understanding improves, formulate value propositions for salespeople which reflect the most advantageous cash flow contributors of the business.

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