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Mark Stonebridge
Freelance Professional
Freelance Professional

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Key Cash Flow KPI’s for Improving Working Capital

Cash flow is the life blood of every business – without it everything comes to a grinding halt.

While many businesses review their profitability with department managers on a monthly basis to improve performance, cash flow and working capital forecasting often only becomes a priority when money gets tight. To improve working capital, cash flow KPI’s should be incorporated into management reports and reviewed by department managers on a monthly basis.


It is imperative that a business maintains a minimum cash position that ensures the organisation has enough liquidity to meet its financial commitments.
These commitments include payments to suppliers for inventory and operational expenses, payments to staff for salary and wages, payments to the ATO for PAYG and GST and payments to banks and finance companies for loan repayments.

In industries where cash flow can be volatile or irregular it makes sense to build in a “cash buffer” that can help a business endure economic downturns and reduce financial stress.
It is important that bank accounts are reconciled on a regular timely basis (preferably daily) so that a business’s cash position can be ascertained quickly if required.

Key Ratios

Quick Ratio (Cash + Cash Equivalents + Debtors) / Current Liabilities - the higher the ratio – the greater the organisations liquidity.

Current Ratio - Current Assets / Current Liabilities - This should be at least 1:1 – anything less may indicate a shortage of funds.

It is important to note that these ratios may be skewed if there are large amounts of bad or doubtful debts or obsolete stock that need to be written off.


When things start to get tight, creditors are usually the first to feel the pain with delays to payments. With the increasing use of electronic payments it’s harder to use the excuse “the cheque is in the mail”. Delayed payments can lead to tighter credit restrictions and issues with stock ordering. If you start receiving complaints about accounts payable – it is time to review your cash position and forecast.

Key Ratios

Aged Creditors – percentage of overdue creditors segmented by 30, 60 and 90+ days.

Creditors Days to Pay – average number of days to pay suppliers.


All businesses should have clear inventory KPI’s and stock policies that take into account current economic supply and demand and organisational sales targets. Excess inventory can occur when economic conditions deteriorate leading to a reduction in sales volumes, which in turn ties up working capital and may create physical storage issues. In addition to overall stock levels it is also important to review stock mix to ensure that the business has the right levels of stock on an individual or segmented stock basis to meet customer demand.

Key Ratios

Aged Stock– Aged Stock / Total Stock

Stock Turnover – Average Stock on Hand / Average Cost of Goods Sold


Accounts receivable is one of the first places to look if you need to improve your cash position quickly. Documented policies regarding opening accounts, extensions of credit and debtors follow up provide the foundation for minimising outstanding debts.

Work in progress and unvoiced work is another area that must be reviewed regularly to maximise revenue and working capital.

Key Ratios

Aged Debtors - percentage of overdue debtors segmented by 30, 60 and 90+ days.

Debtors Days to Pay – average number of days for debtors to pay.

Work In Progress Days - average number of days for WIP.

Incorporating Cash Flow KPI’s into the monthly management review process will ensure that department managers have a focus on improving their stock ordering, stock management and customer invoicing processes. Always having enough working capital is one of the keys to business survival.

Mark Stonebridge

Freelance Professional

Bridge the Gap between Business and IT

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Free Digital Marketing Short Course - Yellow Pages responds - Not Happy Jan !!!

It was only twenty years ago that forgetting to put an ad in the Yellow Pages was a cardinal sin that would make it difficult for customers to contact your business for an entire year. New technologies including the internet, google and smart phones have all but made the telephone book obsolete.
In today’s world digital marketing has taken over as one of the main drivers of customer enquiry.

Digital Marketing includes:

• Website – Your online shopfront.
• Analytics – Understanding digital KPI’s.
• Mobile – Mobile apps, SMS, MMS.
• Content Marketing – Blogs, YouTube.
• Social Media – Facebook, Twitter, LinkedIn, Instagram.
• Email Marketing – Direct email to your database.
• Marketing Automation – Automate repetitive tasks.
• SEO – Search Engine Optimisation, Improving your rank on Google.
• Digital Advertising – Retargeting, Banner ads.

Free Digital Marketing Short Course

In 2015 Charles Sturt University ran a Digital Marketing Short Course as part of its IT Masters program. The good news is that is available free to everyone. If you are unsure of where to start or would like to improve your understanding of digital marketing this course is an excellent resource.

Not Happy Jan !!!

Twenty years ago Jan forgot to put the ad in the Yellow Pages. In today’s world Jan would be legging it if she forgot to setup the company Digital Marketing campaign. The good news for Jan is that she doesn’t need to wait an entire year to fix the problem - she could get started today…

Mark Stonebridge

Freelance Professional

Bridging the Gap between Business and IT

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What is the chance of success for your next IT Project?

Despite improvements to project management methodologies, techniques and collaboration software in recent years, the failure rates of IT projects are still comparatively high.

Before embarking on any project that will have major impacts on organisational operations it is imperative that key stakeholders understand:

• Where the organisation is now.
• What are the key drivers for change.
• Are these key drivers aligned with business goals supported by management.
• Where should the organisation be at the end of the project.
This is potentially easier said than done as people may have different opinions on these points depending on their previous experience, attitude to change and vested interests.

Often times when starting a project, management may not know exactly what they want or need. Understanding key project drivers allows developers to ask questions that can crystalise and prioritise requirements and reduce vagueness in scope.

The Good

Agile programming techniques (eg. SCRUM, XP, etc) have gone some way to try and address these issues through the use of short iterative development cycles focusing on high priority requirements, short targeted daily meetings and an acceptance of change throughout the project.

In recent years there has been an explosion of cloud computing team collaboration and project management software eg. JIRA, Basecamp, Sharepoint, Wrike, etc, that has also helped improve stakeholder communication throughout the project life cycle.

The Bad

When scope is vague it is likely as project progresses that different stakeholders will have a different understanding of what will be delivered. Unlike a set of building plans where everyone can conceptualise the final product prior to starting, end users often have difficulty understanding abstract computer system models. This often means that the project journey starts with incomplete information about the final destination.

The Ugly

This can have flow effects if the project is put out to tender. If the scope is not clearly defined or is ambiguous, suppliers have the potential to minimise initial project cost estimates knowing that as the project continues, more refined requirements will be considered changes and thereby added to the project cost as variations.

Due to the intangible nature of system development it is difficult to change suppliers if the project goes off course. This can have devastating impacts on an organisation if costs blow out significantly or the project is completed with a reduced scope.

IT Project Success Factors

• Understanding the business goals and key drivers for change.
• Management buy-in.
• Have as clearly defined scope as possible.
• Documented change management procedures.
• Documented conflict resolution procedures.
• Excellent stakeholder communication.
• Build in a cost contingency depending on project risk and complexity.
• IT Supplier expertise, track record and commitment.

Technology changes will continue to impact organisational opportunities to streamline and improve operational effectiveness. Ensuring your project leaders understand your business goals will give you the greatest chance of success.

Mark Stonebridge
Freelance Professional

Bridge the Gap between Business and IT
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