MSME Quality Hub

“If you were to eliminate all the measurements in your business and retain only one metric that benefits you more than the others, what would that measurement be? What is currently preventing you from measuring it?”

One for Action

“Measure your business’s cash flow.

Calculate the profits from the previous month. (Profit = Sales – Operational Expenses for producing the sold product)

Free Cash Flow = Profit – Change in Investments

The Change in Investments is calculated by adding the inventory changes from the previous month to the current month, along with changes in receivables from your customers for the delivered product, and then subtracting the change in payables to vendors.

Change in Investments = Change in Inventories + Change in Receivables – Change in Payables

Did your cash increase from last month?

If not, take action to identify the constraint and increase it.”

Learn more about identifying the constraint.

Still have questions? Write to me…

One for Sharing

“If business is the heart, then cash flow is its blood. Ensure seamless outgoing and incoming flows. “

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