With hair standing on end, and wearing an old paisley silk robe and worn sheepskin slippers,  he added milk from the carton to the bowl and turned the mix master on to “high”.  Oblivious to the milk spluttering from the bowl he added, eggs, vanilla, and baking powder.  But it was when he added flour that the concoction took off with mass distribution of little dough droplets hitting the counters, walls and even the ceiling.

“Mummy, Daddy is making awfuls!” my brother Donald screamed in glee as he raced up the stairs to awaken the household. Yes, waffles were “awfuls” in my house growing up because to my mother there was an “awful” mess to cleanup following the legendary Sunday morning breakfasts.

Years later, 1993 to be exact, I visited my father for Sunday breakfast and he explained that he had now been delegated to pouring the orange juice and occasionally (under supervision), to the cooking of the toast. “Awfuls” were off the menu. He didn’t mind, as Sundays were also the days he worked on his Cash Flow Forecasts, a process that he wanted to share with me.

He began by unrolling a 11 by 17 inch scroll under his arm. Over 500 inches, and two years of ledger sheets in pencil, attached by month with scotch tape, stretched from the dining room through to the front hall and beyond to his office door.  On hands and knees with the only tools being a pencil with eraser and a magnifying glass my father in his paisley robe explained the importance of cash flow management. There was no calculator as math is done in your head he explained. He showed me how each month he would insert the actuals to replace his forecasted numbers and how he would erase and adjust the numbers going forward for two years to reflect the new reality. He had a column for the previous year to compare his performance.

I recall my mother appearing and discovering us on the floor surround by the spreadsheet mess and asking, “Hugh, what in the world are you doing?”  “I am showing Elizabeth how to do cash flows, dear”.

Thank goodness for Microsoft Excel today as that manual process took us all afternoon! However, the learning was invaluable as I was able to determine the negative impact on my cash flow of taking on a new large customer requiring special billing arrangements. This was my first funding requirement.

Here are 8 tips on managing cash flow:

1. Commit time to regularly updating your Cash Flow forecasts – it can be once a month or more depending on what stage your business is at
2. If you discover a cash flow problem identify the cause and also how long you will have the problem.
3. Determine the best solution – Can you cut back in expenses somewhere? Do you need to negotiate with suppliers or customers, make adjustments to your sales or marketing efforts, or get a temporary extension on your line?
4. If you are borrowing money scrutinize the terms and calculate the interest
5. Efficiency analysis – could technology streamline and make your operations more cost efficient in someway?
6. Customer evaluation – do a credit check on your customers. Poor paying customers may have to be introduced to your competitors (haha)
7. Reset management priorities – you may have to curb some plans for a bit. Determine for how long.
8. Rainy Day Fund – never cut back on contributing to your rainy day fund to fund growth. We live in a game-changer society and you may need to change course suddenly and will need cash on hand.

As a final comment, sometimes putting your business in a negative cash flow position is a calculated risk that is necessary.  We will explore this subject more in future posts.