Cashflow Bottlenecks

May 2016

Eliminating the Quiet Kinks

Kinks. Bottlenecks. Hang-­ups. Whatever you want to call them, they are pesky, dangerous, and part of every business. You can have the most efficient cash flow model in the history of business, and just one kink can slow or stop that money right in its tracks. Sometimes these kinks are obvious, such as “our shipping software is out of date and crashes all the time, delaying orders.” Sometimes these kinks are hidden; veiled under the surface, quiet yet still vicious.

Chris H. is a former student of mine, and fitting the analogy, runs an online retail store that sells commercial gardening supplies to large landscaping firms. And where a kinked hose is an inconvenience to his clients trying to water plants effectively, kinked cash flow is equally bad for Chris’s business. Recently, Chris reached out to me when he was having an issue locating a bottleneck in his cash flow. He had a quiet kink that he was having trouble locating.

As I recommend to all of my students, when you have a problem, sit down and look at everything starting from the bottom and working your way upward. Especially with bottlenecks, the issue is usually something small causing larger headaches. Chris and I started by creating a map of his cashflow model ­­ a flowchart of where the money originates and where it finishes. As we went along, it didn’t take much time to find his kink. We discovered that Chris’s company was not invoicing their vendors on time, thus slowing down the cash flow immensely. “I can’t believe that this whole issue,” Chris said at the time, “stems from something so small and so easy to fix.”

And this is the trouble with quiet kinks and bottlenecks. Bigger issues, while possibly traumatic, are easy to spot and immediately remedy. However, smaller, quieter problems can exist for months, possibly even years, before they are tracked down and solved. And in some cases, the damage has already been done.

Luckily for Chris and his company, he kept close tabs on his cashflow and was able to fix the issue quickly. His cashflow quickly recovered. And since the time he and I worked through his problems, I’m happy to report, that his business is blossoming. Pun intended.

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