Cash flow forecasts don’t fix cash flow problems

“The cash flow expert we hired did a 13 week cash flow forecast. He set up our software to produce it every Monday.

But Susan, we never  got out of the cash flow crunch. We are still struggling to pay our bills.”

The CEO of the company told me this after I was referred to them by their banker.

Why was I, the pricing strategist, asked to help this company?

Because pricing and cash flow are intimately intertwined.

The bank refused more credit to this company. They were heavily in debt and couldn’t pay back what they already owed.

I immediately asked about their Terms and Conditions.

The source of their cash flow crisis was their Terms and Conditions.

They had more than enough sales to cover their expenses, but the cash was coming in far too late.

When I recommended that they change their T&C, they said absolutely not.

And a couple of months later they declared bankruptcy.

30 years of work reduced to zero value.

Has this happened to you?

You seek help to turn your cash flow positive and you’re told the first step is to generate a 13 week cash flow forecast.

So you do that for several weeks.

And each and every day you still have to decide:

  • Which bills to pay
  • Which to put off
  • What tactics could you use to get someone to pay their outstanding invoice.

You wonder if you can survive another week, month or year.

Forecasts don’t fix the problem at its source

What effort can change your cash flow from negative to positive?

I’m glad you asked!

Remember, cash flow is about the timing of cash in and out of the company.

On any given day, you could be sending out more than you take in. That would be negative cash flow.

In a healthy company, the amount that is coming/has come in is always greater than the amount going out.

Terms and Conditions create positive cash flow

The one and only source of negative cash flow for a company that meets its revenue targets is their Terms and Conditions.

The most important provision of T&C is the timing of the payment.

In almost every other area of your life, you know you’re expected to pay for your purchase at the time you buy it.

Why is it that with professional and B2B services, companies think they have to allow, and buyers think they deserve, payment after purchase?

The main reason 30 day or longer T&C became expected is because of hourly billing. A firm can’t expect payment at time of purchase if they can’t tell the buyer what the final price will be.

Aha! That’s why a pricing strategist will solve the cash flow problem

Pricing is so much more than the dollar amount a buyer pays.

Pricing  strategy includes all of these in addition to the actual dollar price:

  • Costs to deliver the service
  • Timing of the delivery
  • IMPACTs delivered
  • How a company makes its offers
  • Timing of the payment
  • Other T&C such as payment methods accepted, refunds, managing complaints and so on.

When a professional or B2B services firm hires me for pricing strategy, we start with their Terms and Conditions.

Once they decide to require payment at time of purchase, we create the pricing model that enables them to tell the buyer what the final price is.

Objections!

Most of the objections revolve around “what’s expected” or “we do what everyone else does.”

If you have me working for you, be prepared for me to dismiss those objections out of hand.

Who is running your business? You or a mob of outside strangers?

I speak from personal experience


In 2010, after 10 years of hourly billing, I came home from 8 weeks of business travel. I had a huge stack of bills to pay—and very little cash in my bank just then.

All the receivables in the world were not going to pay my mortgage, my credit cards or my grocery bill.

I knew there had to be a better way.

I chose value based pricing, a method where the client requirements would determine what the fee is. It would be payable at time of purchase.

Everyone in the industry told me it wouldn’t work. They not only told me, they screamed at me.

I committed to no more hourly billing.

The first person to call me was referred to me. After a great conversation, the caller asked what I charge.

I took a deep breath and said “I charge for the value you get. It will be a fixed fee. I’ll write a proposal and have it to you first thing in the morning.”

I paused, holding my breath, waiting for his reply.

He said, “That will be great.”

During our wrap up conversation, he told me “You did everything we needed, just like you promised. Thank you so much.”

I have never looked back.

If I’m not overstepping, I’d like to suggest that you stop accepting what is hurting your firm and make the change that will create positive cash flow.

Make 2025 your year to Be BOLD.

Text CASHFLOW to 703-801-0345.

 

Leave a Reply

Your email address will not be published. Required fields are marked *

More Articles

We’re Stuck on a Plateau!

“I’m ecstatic and perplexed,” the CEO of a leadership training and development firm told me. On the ecstatic side was that the company had tremendous

Read More

IMPACT Based Pricing

Subscribe to IMPACT Based Pricing, TCG’s original content newsletter that helps Business Owners and Executives understand everything about pricing for impact, not for inputs.