I just got back from speaking at a petro meeting. The association had chosen cash flow for the topic and as I prepared, thinking about my audience and realizing it’s the best and the brightest that show up at industry conventions, I was a little concerned the topic was a little trite for a room full of super successful marketers. But, as delved into my presentation preparation, I realized that while cash is still king, the game has changed significantly enough that even historically successful marketers get caught at times.
The reality is that petroleum marketing has become more volatile, more technical, more automated, more sophisticated, more price transparent and more complicated than ever before. And that is why the cash flow game is different than twenty, ten, or even 5 years ago.
Marketers are experiencing price volatility, margin shifts and even refinery outages. Whether you are currently winning or losing depends a lot on your location, your foresight, your strategy execution and … a good dose of dumb luck.
If you are still doing fabulously, may I strongly suggest you ask yourself “why?” Too often success and momentum mask business deficiencies. During high growth, high profit times, your company may do so well that the lagging parts barely bother you. But they should. They are sucking profit.
If you are on the losing end, you may already be kicking yourself for thinking that last year’s profits were going to hang around forever, and now that they aren’t, wishing you had kept the belt a little tighter.
No matter whether you are winning, losing, or just treading water, spend a few minutes pondering these seven critical checkpoints:
- Your executive dashboard. If you have one, is it timely enough for you to make cash flow assessments and corrections? If you don’t have one, get one! Every CEO needs to keep their pulse on cash flow. At Meridian we teach a 10-step foolproof financial method. Add to those 10 points your company annual and quarterly goals, and possibly a few loan covenants and you are all set. I love it when the dashboard is set up to push to your phone so when you are out at a convention or on vacation, you’re in the know and able to take swift corrective action if needed.
- Your team’s receivables management. Most petro marketers largest dollar asset is tied up in receivables, so it’s no wonder that those companies that resoundingly conquer receivables processes win the daily cash flow game. It’s why we host a credit huddle every month as part of our www.PetroAnswers.com service where credit managers hone processes and skills. The dedicated ones are getting more and more accounts on electronic funds transfer terms, and watching cash like a hawk. Of course, it all starts with applications, credit limits, correct terms, and accurate and timely billings, along with stringent account monitoring. A lot of credit pros think they are doing the job well until they join our huddles!
- Your inventory practices and controls. With the complexity and numbers of products going wild, it’s super easy for inventory to get equally wild. It’s music to my ears when I hear about SKU reductions and super structured inventory processes because excess inventory is such a huge cash waster in any business. Typical financially based inventory reductions might cut about 5% of your cost through slow mover analysis, shrink etc. That’s not enough. We are helping marketers made serious reductions WHILE becoming more profitable. What’s a serious reduction? How about going from over 6,000 SKUs to 2,700 while improving customer satisfaction and putting millions back into cash flow.
- Your Cap Ex and Acquisition Matrix. While this tool sounds fancy, it can be as simple as a spreadsheet with your rules of how you spend money. Many petro owners keep spending decisions to themselves and never articulate to their team how they make those decisions. If you don’t have a matrix and decide to tackle one, you’ll be amazed at how just writing down the guidelines you do automatically in your head for spending decisions become crystal clear and once written, serve as a roadmap to your team. Your team will stop bringing you requests you veto once they know how you make spending decisions. In buy/sell transactions, I love working with buyers who share their matrix with me because it allows Meridian to make exact fits saving them (and us) tons of time.
- Your seasonal/cyclical cash flow lulls or low points. If you have them, you shouldn’t. Don’t even think to yourself, “but Betsi!” I’ve heard them all – we are a winter business, we are a summer business, we always lose money in _______ month. Really? And why are you still tolerating this? Get a countercyclical product for goodness sakes! Where was it written “though shalt only sell petroleum products” in your family’s business bible? Make a pact with yourself right now that you will do whatever it takes to make sure your family business makes money every single month of the year. I love the innovative ways marketers are breaking traditional cash flow cycles.
- Your personal key vulnerability. Ask yourself the question “What do I do for the business or in the business that no one else does?” Bingo! The answer is your key vulnerability because if something happens to you, you’ve just put lots of employees and their families in jeopardy. Do you perhaps secretly think that no one can do what you do? Or at least well? If you think that way, it’s awfully egocentric! I know because that was me a few years ago. If you don’t have a person in the company right now who can be your #2 supporting you in your current lone ranger tasks, then either break those tasks up and train different people to do the different pieces, or you better hire someone who can back you up quickly. You are a big risk to your company until you do.
- Your personal leadership. Now in my third decade advising the petro industry, I’m convinced that everything rises and falls on leadership, including cash flow! I learned that powerful leadership truth from John C Maxwell, named by Inc Magazine last year as the #1 leadership expert in the world and my FOCA 2014 headliner speaker. Starting in 2015, John became my personal coach and mentor and via his guidance and tough questioning, I have come to more fully understand that success, or lack of success for any company primarily rests in the leadership capacity and skill of the CEO and executive team.
So my last question to you is “How is your leadership? Are your ducks flying in formation and happy?” If so, my bet is you have a personal business coach that’s helped you get there. Why do I say that? Because I’ve learned that every business person has blind spots they can’t see and it takes a skilled coach to help see them. A few years back I added private monthly one-on-one coaching time to my M-Power™ program for my petro CEO clients. As a result, one of my absolute joys is witnessing leadership growth — leaders solving people problems faster, creating more joyful workplaces and taking worry-free vacations, sometimes for the first time in their life. It’s a pretty cool thing for me.
So how did you do on the seven? If you didn’t score 100%, implement and conquer these cash flow checkpoints and I know in my heart of hearts your cash will be flowing, your teams will excel, your customers will love you, and your family business will be a source of joy as well as prosperity for your future generations.
