Cash Flow Surge: 101 No-Cost and Low-Cost Fast-Action Strategies to Boost Your Business Cash Flow

by Alastair Thomson (interview)

In college I took a course called Small Business Finance. The main thing I remember from this course is the emphasis on “cash flow, cash flow, cash flow.” Alastair Thomson is an accountant who has been a CFO and CEO of several businesses in the U.K., across variety of industries. He wrote this book for owners of small and medium-size businesses. While cash flow and profit are not the same thing, many of the ideas in the book can improve both.

The 101 chapters cover suppliers and expenses, customers and revenue, staffing and procedures, communication, insurance, logistics, contracts, and technology. Here are some snippets:

STRATEGY 6. “Take a look at your major supply contracts. Do you know when your commitment to purchase from that supplier ends? Also check what notice period you have—some long-term contracts don’t just run out, you need to give, say, three months’ notice before the end of the contract period if you want to terminate it, otherwise the contract automatically renews for another year or two, locking in the rates you’re paying now even if they’re uncompetitive.”

STRATEGY 58. “Most businesses I’ve come across would be better off with a short contract, even at a higher unit cost, because when something changes…as it will, sure as eggs is eggs… you can quickly shut down what you used to do and do something different instead, without worrying about penalties or long-term contracts.”

STRATEGY 56. “Automating things that should never be automated costs businesses millions of pounds every year. If you try to automate everything, you’ll pay the price—both upfront in the capital costs of developing a new system and on an ongoing basis if the new tech solution upsets customers enough that they start to buy elsewhere.”

STRATEGIES 12 and 19. “Some businesses buy stock in large quantities because the ‘per unit’ cost is lower. However, if that means it sits around your warehouse longer, one way or another you’ve probably spent just as much as you would have done buying a smaller quantity at a higher cost per unit… Think of it as a logistics problem.”

STRATEGY 24. “Consignment stocking is where a supplier delivers stock to you without raising an invoice. Instead, they do a stocktake at the end of each month and you only pay the supplier for what you’ve used since last month’s stocktake. It’s ideal for products you use all the time and will re-order reasonably regularly… The supplier benefits because they save on warehouse space and they know they’ve already ‘sold’ the products they’ve shipped to you, even if the invoice itself follows along a little bit later. What’s more, you never run out of stock of anything you have on consignment, which is a big bonus if it keeps your machines running when they would otherwise have to stop until the next delivery of something mission-critical arrived.”

STRATEGY 33. “Frankly, I’m not a huge fan of bonuses. You can employ a £15k person with a £5k bonus and it will cost you £20k in total. Odds are, you’ll have a much better business employing a £20k person off the bat and paying them a straight salary… What’s vital though, is making sure the bonus is calculated at the right level. That’s harder than it sounds if you don’t have a detailed cost structure breakdown in your business… There’s likely to be some point, even if the 5% base rate was fair enough, that additional sales means you pay out more in bonus than you make in extra profit. I’ve seen that too often to think this is a rare phenomenon.”

STRATEGY 36. Offer a lower-priced version of your product to encourage trials by new customers. But make sure not to sacrifice quality. You want them to become regular customers. “You don’t, however, want a bewildering array of different products and prices. That benefits no-one, and especially not you… I always suggest three is a good number…. A standard offer, a super-premium offer, and a cut-down offer.”

STRATEGY 11. “Your pricing should be determined by what your product or service is worth to [the customer], not what it costs you to make… I gladly paid a slightly higher price for spare parts from a supplier who guaranteed a 2-hour delivery, compared to the 24-hour turnaround most suppliers guaranteed, every time one of our multi-million-pound printing presses went down.”

STRATEGIES 42 and 57. “Price rises are always really good for your business and are much better in profit terms and cash generation terms than reductions to your own costs.” The author walks you through the calculations. A similar idea is presented in The One Percent Windfall. “Price resistance is more in the mind of the seller than the buyer.”

STRATEGY 47. “For anyone you’re spending say, 20-30% more with year on year, just call them up out of the blue and tell them… you’d appreciate them thinking about the ways they can give you a better price… It also gives them a way to serve you better without necessarily slashing their own margins. For suppliers you value, you need them to be profitable in the long run too, or they won’t be around to supply you at any price… Good suppliers really are worth their weight in gold.” I like how Thomson recognizes the value of good supplier relationships and does not approach negotiations as a zero-sum game.

STRATEGY 59. “What are the key things that would bring your business to its knees more or less immediately? If your business is like most I come across, it probably boils down to a handful of individuals and a few pieces of equipment… So don’t wait for disaster to strike before developing ways to keep going if it does. That’s almost guaranteed to be an expensive way to fix anything as you’ll be charged premium rates by everyone involved… Pay your staff well and treat them well. It’s a lot less likely they’re going to leave you if you do.”

STRATEGY 81. “The most expensive things you’ll buy are things you need in a desperate hurry. That’s why you should always run with some spare capacity in your business.”

STRATEGY 88. “You might think this a slightly unusual thing for an accountant to say, but budgets don’t help your business as much as you might think they do… That’s because the world changes a lot faster than once a year for most businesses I come across…  As a result, most business’s planning cycles are now well out of kilter with their operating cycles.” The author explains how he revisits the budget monthly, quarterly, and semiannually. “Try the 6-3-1 method instead to keep your planning cycle and your operating cycle in sync.”

STRATEGY 93. “I’ve… doubled the size of businesses in a few years just by focusing on customer service… Businesses providing great customer service stand out in their industry because so few of their competitors even try… There is just one little trick to this though. You have to make sure your frontline staff are completely focused on serving your customers. Your systems need to be good, otherwise frontline staff will spend all their time firefighting.”

STRATEGY 96. “The secret to improving productivity 20-37% is to bring more happiness to your workplace. A study by the Social Market Foundation discovered happier employees were 20% more productive than unhappy ones. And if you make your sales force happier, according to an article in Forbes magazine, your sales team can be up to 37% more productive than their unhappy colleagues working for your competitors.”

STRATEGY 99. “What would you rather have – a margin of 6.5% or a margin of 20%?” The author explains that sometimes margins are boosted by cutting quality, which leads to increased customer service and rework costs as well as increased customer churn. “At the heart of all this counterproductive behavior is the disconnect between high margins and high profitability… Happy clients are what gets you long-term bottom-line profits. And while generally high margins are preferable to low margins, if you boost your margins by ripping off your customers, eventually they will notice and go elsewhere, depriving you of a stream of profits over many years which had been right there for the taking, if only you concentrated on the bottom line performance and not been too excited about artificially boosting your margins.”

STRATEGY 45. “A study by elite global consulting firm McKinsey, quoted in the Harvard Business Review, determined that professionals spend an average of 28% of their time at work writing or answering emails.”

“Here’s what to do—start doing more things in person… Pick up the phone to that customer or supplier rather than send an email. Especially for customers, the tone of your communication is very hard to pick up in an email… Talk to them on the phone and you’ll stand a much better [chance] of gauging the mood right.”

“Make a point of walking around the office and checking in with people in person every day. Make it a habit and people won’t come and bother you, they’ll just wait till you pass by ‘on your daily rounds’ to ask those questions they’d otherwise have interrupted you about.” This reminds me of what Tom Peters calls MBWA—management by walking around.

STRATEGY 70. “The only reliable way I’ve ever found to keep the focus on your team where it needs to be… is to have a five minute catch up with your team every morning… There are only two rules. Firstly, every member of the group has to be there because it’s amazing how much impact even one person drifting in a different direction can have on the team as a whole. Secondly, it has to be literally five minutes.”

STRATEGY 30. “The biggest single contribution I’ve ever made to the bottom line of any business I’ve run has come from a continuous improvement approach which calmly acknowledges problems, large and small, as they arise and immediately sets out to find a way to ensure those problems don’t occur again… There’s no cheaper way to run a business than to do everything right the first time… The business where I saved 56% prided itself on its efficiency. And to a point, within [each] department, that was true. However, they caused problems for other departments and other departments caused problems for them which nobody spent any time fixing. That was ‘nobody’s job’ so I made it mine.”

As an American reading this book, I found it fun to encounter examples of two countries separated by a common language. I learned that “stocktake” is British for taking inventory. “Excess” appears to be the British term for an insurance deductible. “Ex works” means FOB Origin. Brits put a project out for “tender” rather than out to bid. The meaning of these terms is obvious in context and add to the charm of Thomson’s writing.

As a former business owner and employer, I can say this book is worth your time, even if you only end up implementing one or two of the concepts. Experience is the best teacher; benefit from the wisdom of Thomson’s 30 years of financial management experience.

Thomson, Alastair. Cash Flow Surge: 101 No-Cost and Low-Cost Fast-Action Strategies to Boost Your Business Cash Flow. North Yorkshire, U.K.: Success Detective Ltd., 2020. Buy from Amazon.com

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Note: I have modified the spelling to appease my American spellchecker.

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