b'BUSINESS MANAGEMENT CSIA 25I nflation is rising faster than any time in recenttoacceleratethedrainofmoneyfromcompany memory. Businesses must deal with rapid costcoffers, and throttle the flow that comes in. If left increases by managing cash flow and dealingunaddressed, these battling trends can gut profits effectively with customers and suppliers. Theand threaten business survival.benefits of inventory reduction must be balanced against the need to maintain critical stock for topExperts advise looking at the coming months with customers. aneyetowardestimatingwhatwillhappento cashbalances.Proactivelymanagingcashflow Inflationhastakenroot.Businesseseverywhereis critical right now, said Lisa Anderson, president are dealing with annualized cost increases of nearlyofLMAConsultingGroup,Claremont,CA(lma-7%the fastest pace in 40 years and significantlyconsultinggroup.com). This can be done by running higher than the 1.8% average of the past decade.periodicforecasts.WhatIwouldrecommendis The resulting upticks in operating costs can causelooking at your demand-side and asking, What are serious damage to the bottom line. we really going to need here? And then looking at your supply side and asking, What will I have to Wereinaveryunfortunatesituationnow,saidmake?Andthendeterminingwhattheanswers BillConerly,Principalofhisownconsultingfirmmean for cash flow. If its going to be negative, you in Lake Oswego, Oregon (conerlyconsulting.com).better borrow some money.Businesses that have always devoted their efforts toservingcustomersandbeingproductivemustSuchanalysis,ofcourse,involvesestimatesof also start worrying about covering their costs in thefuture revenuesa practice tainted by uncertainty. most effective way. That means they need to shiftHaving a sales forecast is great, but that doesnt some of their focus to coping with inflation. Themean you will collect all the money you think you challenge is all the greater for its unfamiliarity: Itswill, said Scott Beaver, Senior Product Marketing been 30 years since inflation was much of a playerManageratOracleNetSuite.Andevenifyour in company planning. sales forecast is a hundred percent accurate, will the expected timeframe be met? What determines Experts dont see relief any time soon. They pointcash on hand is not sales but collections, and history to a number of root causes, one of which is energy.showsthatduringinflationarytimescustomers With the cost of oil baked into so many things, itstart paying slower as a result of their own cashCENTRAL STATES INSULATION ASSOCIATIONseems we are going to see more significant inflationsqueezes.in the months ahead, said John McQuaig, managing partner of McQuaig & Welk, the Wenatchee, Wash.,Planningmustreflecttherealityofcashflow basedmanagementconsultingfirm(mcqw.com).uncertainty.Growingaccountsreceivablecan He points to a continuing global disruption in theputaseriousstrainonsmallerbusinessesthat delivery of goods and services as yet another cause.may not have the cash reserves to absorb delays Supply chain issues tend to create opportunitiesinreceipts,saidBeaver.Formostcompanies, to raise prices because of the effect of supply andcash flow forecasts are less than 75% accurate. demand. When the former is crunched, prices go upOne approach to anticipating likely variables is to by the nature of the market. And theres yet a thirdlookathistoricalperformance.Whatpercentage driver of higher costs: a wage spiral resulting fromofreceivablesisusuallycollectedduringslower the pandemics softening effect on the labor supply. seasons?Thatfigurecanbeappliedtoopen receivablestohelpestimatethelikelypaceof Forecasting Cashflow receipts.Of all the steps businesses can take to mitigate the bottom-line effects of inflation, the most importantFaster Receiptsis better management of cash flow. Inflation tendsHistoric data, of course, may provide a less than continuedpg. 27csiaonline.org'