Your Company Has Hidden Pockets of Cash—Here’s How to Find Them

Small Business

“Cash is key, and Elvis is the King!” kept asserting my trainer at this intensive two-week long management consulting training 20-plus years ago in the cold Boston winter.

This was a twist on the famous “cash is king” motto—trying to convey to us non-Americans how much Elvis meant to him while emphasizing his important cash message.

With times as they are, cash seems to have taken back its throne for many small and mid-sized businesses.

Cash, the Misunderstood King

The pandemic has had a negative impact on companies’ financials, and cash is scarce in too many places.

No matter how successful and profitable you are, you run out of cash and your business fails. Especially in times of crisis, cash needs to be at the very top of every company’s dashboard—above revenue, gross margin, or profit.

Companies often consider there are only three ways to increase cash: increase revenue, increase profitability, or get outside funding. While these ways definitely need to be considered, they take time to implement—and time is not always available in times of crisis.

The good news is: there are quick wins to find cash.

Small and mid-sized companies often have hidden pockets of cash. Tapping into these hidden reserves can provide much needed oxygen to fuel your business.

In his book CASH, The Fuel For Your Economic Engine: How 1+1+1=19, Gravitas coach Jeff Redmon shares a very simple method to identify these quick wins and increase your cash position.

Three Ways to Identify Quick Wins to Improve Your Cash

1. Reduce time: We have all heard it: time is money. If we can reduce the time between the moment we spend money to acquire a customer, and the moment we get cash from the customer, we will have more cash in the bank.

Between these two moments we have to invest in marketing and sales to acquire the customer, in inventory, production, and delivery, before we can finally bill and wait for the payment to come.

Take inventory for instance, Jeff Redmon asks clients to see their inventory as stacks of dollar bills sitting on shelves. If you can take a few of those dollar bills and leave them in the bank (cut down your inventory), you have more cash to run your business.

The same is true for accounts receivables (the sooner you get money from your customers, the more cash you will have in the bank).

The same for other aspects of your business. Take marketing for instance: marketing tactics that generate leads faster have a positive impact on cash. To the extent that marketing effort attracts a more qualified prospect, the sales cycle may be shortened by speaking with fewer prospects to close a sale.
Similarly, a better production planning, that can reduce the production cycle time (for instance because you spend less time cleaning the equipment between batches thanks to a more accurate production planning), also has a positive impact on your cash situation. More than ever, in times of distress, these opportunities should be favored.

The sky is the limit when it comes to finding ideas to reduce time. Some clients master the art of finding excuses for late payments when they pay with checks (“The check was ready on the assistant’s desk but she was out sick last week and she couldn’t mail it,” “I prepared the check to be signed but the CEO left early; he won’t be in the office until next week and will sign it then”); is it time to consider alternative, faster payment methods, like credit card payment or ACH?

2. Reduce waste and mistakes: Mistakes costs money, but also time. Take mistakes on a PO (written for the wrong products, or with the wrong delivery address), mistakes in deliveries, or in production: redoing the work costs money, but it also costs time—which can delay delivery, and therefore billing, and therefore the customer’s payment to you.

Every day that billing is delayed because of these mistakes are dollar bills that are not on your bank account.

Mistakes occur in every business; identifying where these mistakes occur repeatedly in your business and fixing the situation can have a positive impact on your cash situation.

3. Improve the business model: Modifying the way you do business can also have a positive impact on your cash. From this point of view subscription models are great.

Think of a gym membership: you pay the gym before you actually go to the gym—as opposed to paying at the gym every time you visit them.

The business gets the money earlier, which improves its cash situation. B2B businesses that go directly to online consumers experience a similar situation: consumers pay when they order, without long payment terms—here again improving the business’ cash situation.

How to Increase Your Cash 19%-Plus

Wouldn’t it be great, in the current circumstances, to be able to improve your cash situation more than 19% over a short period of time?

“Yes it would, but that sounds pretty unrealistic” would many CEOs argue. This is true—unless you find a way to break this challenging target into smaller, easier targets. Which is exactly what Jeff Redmon does with the 1+1+1 = 19 rule.

Here’s how it works.

Imagine a company with $1 million in revenue, $500,000 in costs of goods sold and $400,000 in overhead—leaving $100,000 in cash profit at the end of the year.

Here is the trick: can your company increase revenue 1%, reduce costs of goods sold 1%, and reduce overhead 1%?

This probably sounds realistic. And here is where Jeff Redmon’s magic happens: when you do that, cash profit increases 19%.

All these changes increase cash profit over $19,000 ($10,000 come from the 1% increase in revenue, $5,000 come from the 1% decrease in costs of goods sold, and $4k come from the 1% decrease in overhead), which is equivalent to a 19% increase in cash profit—as demonstrated in the table below.

Situation before change% change$ change
Revenue: $1,000+1%+$10,000
Cost of goods: $500,000-1%-$5,000
Overhead: $400,000-1%-$4,000
Cash profit: $100,000+19%+$19,000

Practically, How Do I Do This?

There are a few rules to successfully identify hidden pockets of cash in your business:

Involve your full leadership team. This is not an accounting exercise. Your accounting team doesn’t know where mistakes are made in your business, or where waste could be reduced, and where time could be shortened.

The right people to have around the table are people on the field. Your production team knows where time and resources are wasted. Your sales and customer service people know where mistakes on POs are often made. Have the people on the field around the table.

Break down the problem in smaller, easier problems to solve. Increasing cash 19% is a huge challenge. However: increasing revenue 1%, reducing costs of goods sold 1%, and reducing overhead 1% is much easier to achieve. When combined together though, these initiatives can have a significant impact on your cash situation.

Brainstorm with structure. Have your leadership team brainstorm on three subsequent topics:

  • How can we increase revenue 1%?
  • How can we reduce costs of goods sold 1%?
  • How can we reduce overhead 1%?

Divide and conquer: a great way to find savings in overhead without over-burdening the team is to give each line item in the P&L to a different person, and task them with finding ways to reduce costs without reducing quality or service level.

I have found hidden pockets of cash even in very frugal companies, simply because they hadn’t gathered new quotes on some cost items for the past two years. Think of invisible costs like insurance policies or payment processing costs.


There are ways to greatly improve your cash situation without drastic changes in your revenue or cost structure. They include reducing time, reducing waste and mistakes, and improving the business model.

The key to find these quick wins is to involve your whole leadership team, not just your accounting team, and to break down an ambitious goal into smaller, easier goals, linked to revenue, costs of goods sold, and overhead.

About the author: Xavier Lederer is the founder and CEO of Cheshire-based Ambrose Growth Business Consulting, which helps CEOs and founders of mid-market companies develop and execute growth strategies.


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