The Cash Flow Killer strikes again!June 16, 2017 | Markus Schwarzer

Poor Cash Flow is killing businesses worldwide – mercilessly.

Business failures chart

Did you know that worldwide business studies agree that poor Cash Flow is the main reason for businesses to fail?

Indeed, 90% of small businesses fall victim to poor Cash Flow. Sooner or later.

It wrings the lifeblood out of them.

Human Costs

Add the human cost. Disappointment, Frustration, Partnership breakups, Bankruptcy. Plus significant Heath issues and the Social Stigma of perceived Failure. In Business and Life.

I always expel a sigh of relief if a client of mine shows me their cash flow statement. Then I know they have a basis for better decision making.

Some argue it is an Art to Balance cash going out with cash coming in. Well, it is not.


Why is this Business Killer so prolific?

It happens for 2 main reasons:

A. Businesses run out of money because they struggled to find a viable business model.
Simply, the business does not make enough money. Not generating sufficient income.

B. Businesses run out of money because they don’t plan their Cash Flows.


Cash Flow Forecasting is the elixir to business survival. Essential like breathing for humans.
I am a strong believer in a rolling 12 months cash flow forecast. Perhaps even 18-24 months.

And I still have a preference using the old Excel spreadsheet method.

Why Cash Flow Forecasting Excel?
Because it forces one to think and manually enter every possible future transaction: Sales, Expense, Tax.

Simple is Best

No need to get fancy. Keeping it simple and meaningful.

Optimism is good. Pipe dreams are dangerous

Optimism is a key trait of being human and small business owners in particular.

After all, what realistic person would persevere in the face of so many obstacles, so many naysayers and so much stress?

Whilst optimism is critical for a new business owner, letting it compromise your objectivity can be dangerous to your Cash Flow.

You may be playing into the hands of the Silent Assassin.

Set Realistic Sales Forecast

  • An objective and realistic Sales Forecast.
  • Based on historical Evidence and Real numbers.
  • Use Actual past sales data from your own business
  • or other businesses in your industry as a basis for tracking trends and predicting future sales.

This information, along with some objective feedback from people around you, will help you come up with a realistic future sales projections.

Sales Forecasting can be especially difficult for the first few years of business because you don’t have past sales figures or as much experience to draw from.


This is where working with a mentor from within your own industry may be extremely useful.
A good business mentor can offer their own experience to help you project future sales, and even offer historical sales figures from personal experience to help you predict upcoming sales volumes.


The old saying: ‘It takes money to make money’ remains valid.
But, unfortunately, this common belief can make many a rookie entrepreneur fall prey to gross overspending. Especially in the first few months of business.

Spend wisely

The reality is that while, yes, it does take money to make money, not all startup expenses are created equal.
Starting or growing a business involves plenty of clearly beneficial expenses — costs that will benefit your company’s profitability in measurable ways.

Keep eye on the ball

If you want your business to make money, keep your eye on the Ball = Expenditure.

Review the benefit of every single expense. After all, every dollar you spend on your business is a dollar that is ultimately taken away from your profit margin.


Along with your Sales Forecast, create a realistic and meaningful itemised Budget. And stick to it.

Break Even Point

  • Calculate when you plan for your business to break even.
  • Keep in mind unexpected expenses or opportunities.
  • Go back to your projections and calculate how those purchases will delay your break-even point.

Keep the Assassin at Bay

  • So, you’ve set realistic expectations for future sales.
  • You’ve prepared spending budget, and
  • you’re doing everything possible to make your clients pay up.

These three changes alone will do wonders for your company’s long-term cash flow. But without tracking your day-to-day cash flow, you may still find your business in a tight spot.

Tight Spots

For retail companies, the months just before the holidays are a time when cash flow can be particularly tight. You need more inventory from your suppliers to prepare for an influx of sales, but if those supplier payments come due before your sales actually happen, you may have trouble paying bills on time.

Cash Flow Forecast Statement

Using a Cash Flow Forecast Statement will help you track your inflow of sales and outflow of expenses and tax during a specific time period (e.g.12 months).

This will help to anticipate ‘dry periods’ when you’ll have more money going out than coming in, so you can plan ahead for those difficult periods.

Without one, you’re just guessing at whether you’ll have the money you need when you need it, and you’ll increase your chances of facing late payments and other penalties on past due invoices.

The Cash Flow Killer loves Guessing Games. This gives him the upper hand.

Safety Buffer

No matter how many safeguards you have in place to protect your company’s cash, hiccups in cash flow are a business reality. This may be no big deal if you have a cushion of savings on hand. But if your company is working with a zero account balance, one slow sales month could mean instant disaster.

To safeguard your business from cash-flow issues, maintain an account balance equivalent to at least two months of operating expenses. That way, even if you experience unexpected stalls to Cash Flow, you have reserves in place to protect yourself.


Cash Flow issues are one of the greatest challenges of business ownership. But if you stay objective about your business, rein in unnecessary spending and stay alert to potential pitfalls, you’ll be head and shoulders above your business peers in your potential for long-term business success

Review, Review, Review

Because Cash Flow Forecasting is so vital go over it again, and again. Test assumptions and review with someone you trust: Mentor, another business manager, your accountant or bank manger. 

Don’t be upset if someone points out flaws in your forecast.

Surplus or Deficit diagrammeDecision points

Cash Flow Forecasting flags in which months you can expect to see a cash deficit, and which months you can expect a surplus.

More importantly, you’ll also get an idea of how much cash your business is going to require over the next year or so to survive.


Cash Flow Forecasting is also useful for decision making regarding the next capital project. Growing usually requires investment.

Benefit of Cash Flow Forecasting

  • (Good) Cash Flow planning is the lifeline for business survival.
  • It puts the business in good stead with attracting investment or joint venture partners.
  • It silences the Cash Flow Killer.
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Good Morning Kiss from a Cash Flow KPI!May 23, 2017 | Markus Schwarzer

Morning KissImagine: Monday morning. You jump out of bed. Full of Energy and Bushy-Tailed. Punching the Air. Because your Cash Flow KPI is >1!

Coffee is optional at this point 🙂

Despite social media hype, constantly changing market conditions and demanding customers.

Cash Flow is remains the undisputed King.

1. Fundamentals

The good News:

  1. This Cash Flow KPI is easy to implement:
  2. You need not be a qualified accountant.

A very useful Cash Flow KPI is Working Capital.

2. What is Working Capital?

The amount of Net Cash in your business:

3. WC Ratio is the KPI measure

The Working Capital Ratio is Assets over Liabilities. In this example it is 1.09 :

A WC Ratio of 1.0 or greater is considered acceptable for most businesses. A high WC Ratio (greater than 2.0) indicates a financially healthy position. Perhaps ready for expansion or a long holiday at Malibu. A low WC Ratio (less than 1.0) indicates difficulties to meet short-term financial obligations, and the inability to take advantage of opportunities requiring quick cash.

Furthermore a low WC may flag a potential bankruptcy risk due to low income expectations.


The WC Ratio is an excellent Cash Flow KPI to provide an initial assessment of your own or someone else Cash Flow position. It also might assist in checking potential businesses acquisition quickly without requiring costly accounting expertise.

However, one needs to consider a number of other factors to gain a comprehensive overview of any Cash Flow position. Other factors need to be kept in mind such as the duration of liquidating assets (eg inventories) into real cash.

About Markus Schwarzer, I work with SMEs on reviewing, designing and implementing KPIs for Financial Dashboards. Find out more

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Maori Financial Literacy – failure or success?April 26, 2017 | Markus Schwarzer

Kaikohe is a small town in the Northland region of New Zealand. A recent event Youth Rampage brought Kaikohe into the international limelight. This episode illustrated for me the lack of financial literacy of the Maori population.

One might say, hold on what has a so-called youth rampage to do with financial literacy for indigenous people? Good question.

For me the answer is obvious: Life is about decision making, making good decisions, particularly financial ones. They seem to drive our well-being to a large extend.

In response to the ‘rampage’ politicians called for more police, tougher penalties, more funding. However, in my opinion the cry for more police does not cut it.

Northland is often seen as the ‘poor cousin’ of New Zealand. 40% of the Far North population is of indigenous descent:
Far North Ethnic Make Up







Far North Income to 30k

Far North Income to 10k

Income levels in the Far North are generally significantly lower in comparison to the rest of New Zealand.
Despite the fact that more people in the Far North achieving greater incomes (blue chart), the very low-end of income have also increased (orange chart). Resulting in a curious divergence.

“Māori have endured the cultural and material loss characteristic of colonised white settler countries (Panoho 2012). Contemporary manifestations of colonisation abound with income levels for Māori a case in point.”1

Financial Literacy
The OECD defines Financial Literacy as a combination of awareness, knowledge, skill, attitude and behaviour necessary to make sound financial decisions and ultimately achieve individual financial wellbeing.

From my point of view basic financial literacy includes:

  • Understanding loans and interest
  • Grasping the concept of budgeting
  • Controlling expenditure
  • Dealing with insurance

It by and large covers the learned ability to make basic informed decisions regarding the use and management of money.

Various iwi (NZ indigenous tribes), Government initiatives, local Councils and commercial banks all have expressed their intentions to lift the financial capability of the individuals they can influence.

There are certainly success stories. Hence little evidence of success is evident in the Far North region. A modern and developed country like New Zealand ought to exhibit more financial inclusion.

In a recent OECD survey New Zealand is ranked 6th ahead of heavyweights like Korea, The Netherlands and the UK.2
However, the ranking success for Far North Maori is not just about financial knowledge. It’s more about having the confidence, motivation and attitude to make positive financial decisions.

Motivation and Attitude
A few years ago I was working with Maori on a large industrial site in the Bay of Plenty. One older Maori lady really impressed me. Despite having only minimal formal education, Marama embraced budgeting and cost management with a passion. She developed financial skills very quickly and used them to full effect.
With Marama’s drive the team she was working in started to manage their own purchasing decisions and used these skills at home as well.

On another occasion a middle aged Maori male approached me about understanding budgeting. I showed him an example and he said that he could not read this as this looked like a sea of numbers to him. Nothing made sense until we sat down and went through it step-by step. He said to me I thought only accountants deal with this. I responded, now you know too and you are a truck driver.

Financial literacy gives greater choices in life. It places us all in the best position to make better decisions with better outcomes. For individuals and communities like Kaikohe.
A greater level of personal financial wellbeing across our communities can assist us to greater prosperity  – for individuals and the business community.

About the Author
Markus lives in the Far North and works as a business coach.

Foot notes:
1 Spending Habits of Maori Women, Dr Pushpa Wood, Westpac Massey Fin-Ed Centre
2 OECD, International Survey of Adult Financial literacy competencies, 2016

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Show me the Cash-Flow GrinMarch 27, 2017 | Markus Schwarzer


In my last post these guys looked really depressed. Now they have their grin back. Why? They completed their first ever Cash-Flow Forecast! And guess what it does not look bad at all.

You might ask: Why are you bothering me with this boring subject?  My answer: The majority of SME’s do not forecast their Cash-Flow.

“82% of businesses fail due to poor cash flow management.”
J Hagen of US Bank

Poor or no Cash-Flow Forecasting remains the no.1 Killer.

Fact is Cash-Flow is the lifeblood of any business — the blood that keeps the business heart pumping.

Positive Cash-Flow does not arrive by chance.

  • You have to work at it.
  • Analyse and control the inflow and outflow of Cash.
  • Monitor Cash-Flow on a monthly basis (minimum!, ideally daily).
  • Ensure you have enough cash to cover your obligations in the coming months.

I always recommend to compile a Cash-Flow Forecast. Is this tricky to do?  Yes, it can be if one wants it to be meaningful.

The weather, the US Dollar, the share market. Forecasting anything is difficult. Never mind how deep you dig or how much analysis one performs, a significant amount of uncertainty and unpredictability remains.

Nevertheless, it is the best ‘Early Alert’ you can use:

  1. CashIn. Review your Revenue and start making realistic predictions for the next 3 to 12 months:
    • Keep in mind that customers do not pay straight away. Allow for delays.
    • Include seasonal variations.
    • Assume the unexpected, e.g. some customers may not pay at all.
    • Limit the net terms to no more than 15 working days.
    • Offer discounts to customers that pay early – sounds counter intuitive but it works!
  2. CashOut. Review costs and start making realistic predictions for the next 3 to 12 months:
    • Wages are fixed and you can easily predict those even if you increase staff.
    • Negotiate extended terms with your suppliers.
    • Purchase stock/inventory just in time.
  • Keep it simple, tailored to Your needs.
  • Spend quality thinking time on this exercise.
  • It may be the difference between business success or failure. Don’t become part of the 82%!

About the Author
Markus specializes in Cash-Flow improvements for SMEs with particular focus on Manufacturing.


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Depression Highway – Ignoring Your Cash FlowMarch 15, 2017 | Markus Schwarzer

Looks like these guys suffer from Cash-Flow Depression.

When speaking with business owners about their Cash-Flow position I get blank looks or ‘It’s not too bad’. comments.  Wow, that tells the same story all over and over again.

Cash-Flow is not something that is on business owners minds every day – but it should be.

I understand business owners are busy people juggling a lot of tasks.  And looking at the bank balance and/or the Cash-Flow Statement can be depressive.   Yet, keeping any eye on cash flow is somewhat essential I would have thought.  All businesses have to generate positive Cash-Flow sooner or later.

Apparently more than 80% of small and medium sized business struggle with their Cash-Flow.  The lack of positive Cash-Flow is the main reasons that business fail in the first 5 years.

Surprising this is not. It’s not an Einstein equation:  A. Money coming in, minus B. Money going out equals C = money left over (or not).

So, what are the obstacles? I spotted the following, typical episodes:

  • Owners pumping cash into the business. Usually upfront from savings or personal loans. To pay for expenses, capital or marketing.
  • Business gets traction – slowly though. However costs keep coming. Thick, Fast and Relentless.
  • Revenue is generated but barely covers costs.
  • No full night’s sleep arrives, tossing and turning continues.
  • Keeping fingers crossed, Cash-Flow will turn positive – One Day!

Are there any easy solutions?  No.  This Silver Bullet has not been invented.  Setting up and running a business always harbors risks.  What can be done before jumping in the cold pool of Cash-Flow?

I found these 2 Steps help to minimize on-going Cash-Flow problems.

1. Test all activities undertaken if they contribute to (positive) Cash-Flow, for example:

– Online marketing. Check your metrics:  Am I reaching the target audience before I spend big on marketing? Do I need webinars with bells and whistles?

– Engaging support services.  Do I need to hire an expensive accounting firm right away or can it wait? Do I need a fancy website right from the start or the marketing guru that promises a turn-around in only 30 days?

Take no prisoners when checking this!

2. Align all internal processes towards the Cash-Flow target – this could mean sacrificing a pet project or working in uncharted territory (eg “I don’t like all that accounting stuff – I like selling cup cakes!”). Eliminate those activities or processes that add very little or nothing. Focus on the core business processes with a straight line to Cash-Flow.


About the Author
Markus specializes in Cash-Flow improvements for SMEs with particular focus on Manufacturing.






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