In the last 3 posts we've discussed how marketers can think beyond broad ROI contribution. Now that we understand marketing's contribution to revenue and profit it's time to discuss how marketing can make a positive impact on cash flow and owner earnings.
It's important to remember that profit is not the same as cash. Profit is based on promises, not money coming in. And while they're different, a healthy company requires both.
Cash flow is the revenue or expense stream that changes a cash account over a given period. It's a measure of the company's ability to generate cash over a period of time. Cash flow increase is usually impacted by financing, operations or investing. Cash outflows result from expenses or investments. The faster receivables are collected, the better a company's cash position.
Cash flow speaks volumes about the fiscal wellness of a company. In fact, one thing all of Warren Buffett's stocks have in common is the company's ability to generate healthy, consistent, and predictable cash flow.
So how can marketing organizations begin to bring on more cash, quickly? Below are 3 considerations.
Consider Onboarding and Programs
As stated earlier, the faster receivables are collected, the better a company's cash position. Your company should understand their average days sales outstanding, or DSO. This is the average collection period and receivable days. It's a measure of how fast customers pay their bills.
Let's say it takes a customer an average of forty-two days to pay their bills.This is an opportunity for rapid improvement in a company's cash position. Of course, it's important to understand if this deficiency exists because of poor product, service, or support, or perhaps an internal bottleneck.
Disgruntled customers do not typically pay on time. Consider a customer onboarding program that delivers educational content relative to topics of interest based on the contact's digital body language and purchase history. As an example, one customer journey may focus on maintenance and upkeep of Product A. One journey may focus on getting more out of Product A by using the product in various ways. One journey may focus on Tips and Tricks for using Product A.
Consider Scoring on Cash Flow
Marketers must focus on future profits, but also on cash flow. Companies want to sell to other companies that can pay their bills. Information on cash flow, liability, and revenue data is often available for publicly traded companies.
Consider capturing cash flow data against an account within your CRM system, if you're not already. As you develop lead, or opportunity, scoring models score against cash flow as an explicit entity. Cash flow may not be the most important indicator when identifying sales opportunity, but it should certainly be a factor.
Consider Delighting the Customer
Do you offer customers the kind of service that will encourage them to pay their bills on time? Is the product free of defects? Are the invoices accurate? Does the mailroom send invoices on a timely basis? All these factors help determine how customers feel about your company and indirectly influence how fast they pay their bills.
Develop regular, personalized communications, to your customers that offer helpful content. If you deliver newsletters, utilize dynamic content throughout the newsletter, pulling in content relevant to the client's digital body language. Ask for input and demonstrate that the customer's input and feedback is valuable. Collect their feedback on services received, goals for the future, and satisfaction with results to date. And don't stop at the response. Acknowledge that you received and understand their feedback, and provide a reply that outlines actions you plan to initiate based on their feedback.
You may also want to introduce an advocacy program. Advocacy programs, like those supported by Influitive, allow you to identify advocates, enhance relationships, obtain feedback on products and services, and identify future opportunities.
Remember to baseline your current Days Sales Outstanding numbers. Implement programs that target strong companies and build relationships with your customers. Measure the improvement of your DSO metric month-over-month. Within a year you could very well report your contribution to cash flow improvement.
Next week we'll discuss marketing's impact on inventory controls and capital expenditures.