The Fastest Way to Improve Cash Flow
It is no secret that cash flow is the lifeblood of a business. What is less understood is that there are 8 primary levers that influence it. Four of them focus on profit: price, volume, cost of goods sold, and operating expense. The other four affect invested capital: accounts receivable, inventory or work in progress, accounts payable, and capital expenditures. Before we jump into which lever matters most, let’s step back and look at the bigger picture.
I have the opportunity to work with many smart and successful entrepreneurs. And yes, even strong leaders struggle with cash flow, just for different reasons. Too often, though, leaders reach out only after they are already in a crisis. A service-based business owner recently contacted me after she found herself unable to pay her vendors on time. It was the first time she had missed payments. She felt embarrassed and ashamed. More than that, she was overwhelmed by the reality that the business was running out of cash quickly.
The truth is, her crisis had been building for almost a year. The company had been filling cash flow gaps by stretching payables and taking on more debt. It was not until she maxed out her credit lines and literally ran out of cash that she asked for help. That is a painful place to be, and an even harder problem to fix.
So what should a leader do when they are almost out of cash and out of options? Some try to collect deposits for future work to bring in quick cash. That can be legitimate and even wise if structured properly. But if those deposits are used to cover unrelated expenses instead of the work they were intended for, it becomes dangerous. Robbing Peter to pay Paul is not a strategy. It is a short-term patch that often leads to bigger problems.
Others turn to friends and family for loans. If that is not enough, they may take on high-interest debt that only digs the hole deeper. Some consider selling equity, but if the business economics are already weak, that may scare away investors or force the owner to give up too much control. So what then? Are business owners supposed to give up? No. There is a better path.
Let’s go back to the 8 levers. Of all of them, pricing is the most powerful. When combined with volume, that is where real momentum begins, because price times volume equals revenue. The other six levers matter, especially cost of goods sold, but without revenue there is nothing to optimize. Revenue is the engine. That said, it must be the right kind of revenue. Profitable. Cash flowing. Sustainable.
You can sell a lot of work at a discounted price and make your cash flow problems worse. You can also sell a lot of work with poor payment terms and end up showing profit on your income statement while your bank account is empty because cash is tied up in working capital.
This is where strategy, sales, and marketing step in to solve what looks like a finance problem. The fastest way to improve cash flow may be to build a strong, compelling offer that solves an urgent problem for the right customer. Your strategy must define a clear ideal customer, position your company where you can win, and choose a competitive approach that allows you to either command premium pricing or deliver at a lower cost with healthy margins. Then sales and marketing bring that strategy to life.
If your offer solves a real problem, delivers results quickly, and removes friction for the buyer, customers will say yes more often and with less resistance. That creates momentum. But it must be paired with disciplined execution on the other six levers, or you risk selling yourself into deeper trouble.
Take a landscape maintenance company as an example. Many firms bill monthly after services are performed. They mow, edge, fertilize, and then send an invoice at the end of the month. Cash trickles in slowly, often thirty days later. Now imagine that same company redesigns its offer. Instead of basic maintenance billed monthly, it creates a premium property care program. Clients pay upfront for the entire season at a slightly higher price. In return, they receive priority scheduling, seasonal color rotations, irrigation checks, and a quarterly landscape enhancement consultation. On top of that, the company builds in thoughtful upsells such as lighting upgrades or mulch refresh packages, and cross sells services like snow removal or holiday lighting.
What changed? Price increased because the value increased. Cash improved because payment moved upfront. Volume improved because the offer became more compelling and differentiated. The company did not just pull a finance lever. It pulled a strategy lever that directly improved cash flow.
When you understand how these levers work together, cash flow stops being a mystery and becomes a result of clear decisions. If you are in the fight right now, keep going. Many great businesses have faced the same pressure and come out stronger. And if you know another owner who needs this reminder, send it their way.
Want clarity with your numbers?
See if you qualify for a free financial health check to see where your biggest opportunities are.
