WHY CASH FLOW IS KING

STRATEGIC SALES PERSONS

Making revenue is the most crucial action of any business which requires swift strategies to be put in place. These strategies depend on the type of business at hand where mostly it’s the sales personnel given the task to do it under certain policies laid down by the company.

Businesses with weak sales policies and procedures end up either making huge losses due to the related expenses that come with doing a sale and also having huge cash flow issues due to huge uncollected amounts of sales receivables.

When coaching sales teams, we often hear, “I just closed Ksh500,000 worth of sales this month but my salary still remains unchanged.” Most salespeople work to produce profits, not revenues and do not see beyond the invoice they have produced!

Production and delivery costs are always rising, while clients always expect a price reduction. Any business owner will be able to tell you that huge revenues are often accompanied with huge costs and therefore losses.

It does not really matter how many people work in your firm, or how much the sales department sold last year. The question you have to ask yourself is: “What is our profit, after taxation?” this is so because the real bottom-line profit is a true reflection of how the company is doing.

CASH FLOW IS EVERYTHING

Most sales personnel view the need to make sales as key while ignoring the importance of collecting the same from their clients which leaves the company on its knees struggling to manage its basic expenses. A company needs cash for its operations, thus well managed working capital is key for company stability and success.

Companies go bankrupt because of lack of cash to meet critical obligations, not because of lack of profits. You can run the most profitable firm in the market and still go out of business because you cannot pay salaries or rent! You have invoiced enough revenues to probably buy an office space, but your client will only pay you a few months from today. This revenue is meaningless if your bank account is empty and you cannot pay your bills. Why do very profitable companies still encounter enormous cash-flow challenges? These are some of the downfalls of a poorly managed sales team that is operating in a wrong sales mindset.

INVOICES vs PAID INVOICES. Salespeople are paid on total revenues generated, not on revenues that have been paid in full from the client.
IT’S NOT MY JOB. Salespeople are not responsible for collecting the money. There is someone else inside the firm who is tasked with the job of “begging” for payments.
BIGGER IS BETTER THAN FASTER. Salespeople prefer to close bigger deals, regardless of the payment plan since they are not going to be paid any extra commissions for fast payments!
MANAGEMENT BLUNDER. Mismanagement and wrong sales internal controls and related expenses is likely to mislead the company into falling into cash flow problems.