On a recent sales call and noticing that my driving time takes up a greater part of the day, I started to go over what I was going to say in my meeting. I do this, as a routine because I read once, that one of the main reasons why salespeople start to decline in sales, is that they forget to follow their usual best practices. They found that a successful salesperson will tend to get lazy and will tend to skip over information. This report I read took a look at salespeople that were brought in from other companies, they show their sales skyrocket then drop dramatically. Salespeople who have worked for a company for a long period of time and are promoted to sales see more of a steady increase over time. This could be the familiarity that a long time employee would have with a product and therefore have a better understanding of what they do. I believe this is true and it helps to review your sales process frequently. I will make sure I go over my presentation in my head prior to a meeting like on the drive to the client and make sure I cover my points. I will even read over my presentation so that it seems fresh in my mind. A lot of what I do is education of a service so I take my role as a teacher seriously.

I have been working on an idea for my first blog post. I have been looking on business sites and learning about innovative ideas in the marketplace. I looked at serious social issues, world trade issues and nothing has hit me over the head as to this is the article I should write! I looked at what influences our business community and daily lives more than anything else and I came up with “Products”. Our whole economy is built on selling and introducing product. Companies thrive on introducing new products into the marketplace. To remain relevant and competitive there is a constant need to improve. Companies do this by innovating. As I wrote that last line, I discovered my topic; innovation and what people see as innovation in their lives.

People think in order to be innovative you need to create something totally brand new, not the case. Most innovation is really an improvement to something that has been around forever. Take a look at the microwave, when it came out, it most definitely was an innovation. But is it not just an improvement to the stove? I think that can be said for a lot of innovations. Is the bicycle not just an improvement to the unicycle? I think in fact that it is the other way around with the bicycle, but I digress. A definite improvement is easy to spot and because of that most people think they know what an innovation is. Innovation can be classified on a smaller scale; it can be a new way to seal a container or adding ingredients to a baked good recipe to shorten baking time. It is not normally seen by the naked eye. The problem a company has when trying to identify their innovation is that it goes unnoticed. Companies are so absorbed in the final product that they don’t see the innovation that happens along the way.

There is definite value in finding innovation in your company. I can speak to this when it comes to ITC’s (Innovative Tax Credits). Until an outsider like myself points it out to them, most companies I visit don’t realize how innovative they are. Sometimes it takes someone impartial to see what they’re missing right under their own noses.

So what do people see as innovation in their lives? Well, from my standpoint they are not getting the whole picture. Everyone can assume that innovation is something totally new and different and never been seen before, but there are smaller innovations that happen all the time that go unnoticed.

In times of recession, many companies cut down on costs.  But unless you’re facing bankruptcy, cutting costs may come at the cost of sacrificing future sales.  For instance, to make the bottom line look better, you could always downsize R&D efforts.  This may make the current quarter look more profitable.  However, the lack of R&D may hurt you several years down the road, when you have no new products to introduce, and your existing products are nearing the end of their product life cycles.

To follow are several suggestions on how to improve the propspects of your company, and increas cash flow, WITHOUT sacrificing the future well being of your company.

1. Reduce Accounts Receivables

This is not the time to have leniant AR collection policies.  Collecting sooner will free up your AR and increase your company’s cash flow.  Offer small discounts to your debtors, to encourage them to pay sooner.

2. Reduce inventory- go lean!

Unecessary inventory can tie up the bulk of your cash flow.  The worse type of inventory is work-in-progress (WIP).  Ideally, you should aim to have ZERO WIP because not only does WIP tie up cash flow, but they also CANNOT be liquidated, because they are not a finished product.  Finish WIP products as soon as possible.  Because only finished products can be converted into cash. Secondly, order raw materials just in time, when you need them.  Having raw materials sit around costs you money!

3. Invest in operations management

As a business professor of mine once said: “Operations management is not the most exciting field of business.  However, it is the one area of business that you have complete control over.”

You will not be able to increase sales through operations management.  However, increased operational efficiency can free up cash flow by increasing throughput and reducing inventory.  The faster you can get orders out the door, the more cash you can collect.

Analyze your business process and identify bottlenecks.  Make operational changes on bottlenecks only.  If it’s not a bottleneck, then why should you care?  (changing a non-bottleneck will not improve your throughput).  Suggested reading: “The Goal” by Dr. Eliyahu M. Goldratt.

4. Take advantage of tax subsidies

The government can lend a helping hand to business, when economies go south.  The problem is, not many companies take advantage of government subsidies!  One example of a subsidy that is not well know, is the SR&ED program (i.e. Scientific Experimentation and Experimental Development).  This tax program provides companies with an opportunity to seek a reimbursement of up to 35% of their R&D costs.  This can be a huge source of cash flow for your company!

You shouldn’t be pannicking just because there is a recession.  Instead, recessions are great times to investigate improved internal efficiencies.  Now is the time to focus on investigating ways to improve your free cash flow.