9 Deceptively Simple Ways To Avoid Budget Cuts

• Discover the Conversion Efficiency Engine: a systems framework that can help senior leaders visualise how to improve efficiency without cutting budget
• Uncover how friction in one business function can create drag in another - and why most leaders can't see it.

Last month I touched on the concept of capital velocity using a story about two fruit sellers at the same market.

I compared two businesses with the same starting capital and the same market conditions but vastly different outcomes. The fruit seller turning stock daily made three and a half times the profit of the one with the better margin, because his dollar cycled faster.

It naturally raised the question "so what can I do to speed up my capital velocity?"

Fair question. Here are nine places to start.

Some are fairly basic, but each is still worth considering. As I put the finishing touches on my upcoming book, "Real Math of Business", one of the questions I ask is "Is the environment designed to enable the work and deliver the value?" You might notice that actioning some of the suggestions below will require you to re-design your environment. Inconvenient, maybe. Valuable, definitely. I'd encourage you to decide through the lens of what's more valuable to you and your organisation: convenience or value?

1. Rethink your payment terms. 30 day terms is a relic. Offer a small discount for annual upfront payment or require a card on file for subscriptions. Most customers prefer set-and-forget over delayed terms. You just have to ask.

2. Harmonise your payables and receivables. The sweet spot is getting paid by your customers before you have to pay your suppliers. If your customers are on 30 day terms, your suppliers should be on 45 or 60 day terms. Even a 15-day shift in your favour can unlock meaningful liquidity.

3. Review your subscription and contract stack. Most businesses are paying for tools, platforms, and services they no longer use or have outgrown. Ask your IT team to run a quarterly audit. Cancel everything that isn't producing more in efficiency than it is costing the business and renegotiate everything that isn't delivering a massive return. It's unlikely that you'll find a big saving on any single line item, but in aggregate, it adds up.

4. Automate the quote-to-cash pipeline. The longest part of most payment cycles is the time spent waiting for your customers to get around to paying their invoices. Trigger payments automatically on milestone approval.

5. Invoice by milestone, not at completion. If you're waiting until a project is finished before you send an invoice, you're giving your customer an interest-free loan. Break projects into phases and invoice at each one.

6. Stop funding your customers' scope creep with your own cash. If a project has expanded beyond its original scope and you haven't invoiced for the additional work, you're funding your customer's lack of planning with your own capital. Scope changes should trigger a commercial conversation immediately when everyone has skin in the game, not at the end of the project when the relationship feels strained and you're pitching for repeat business.

7. Shorten your delivery-to-invoice cycle. In many businesses, the work gets delivered on a Tuesday and the invoice goes out the following Thursday. That gap is invisible to most leaders and represents an opportunity for every single one of them. The day the work is delivered is the day the invoice should be sent.

8. Audit your inventory. Think of every product sitting in a warehouse, on a shelf or behind the bar as a stack of cash that isn't just sitting there doing nothing for you, it's depleting every day it sits there and costs you in storage, retail space or lost earnings potential on a faster moving item. If it hasn't moved in 90 days, discount it, bundle it, or write it off.

9. Empower your sales team. If your salespeople need three executive approvals to offer a discount, your velocity is dying before the cash conversion cycle even begins. Standardise your pricing. Pre-approve discounts under a set of standard conditions. Empower your sales team to close on the spot.

When conditions contract, all the participants in my CFO Boardroom program are skilled in finding alternative forms of efficiency before they resort to budget cuts. Capital velocity is one of the first places they look.

How could you improve capital velocity in your business?

I'd love to hear your thoughts.

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