Like many growing companies, Benko Products, based in Westlake, Ohio, which manufactures industrial ovens and el-evating platforms, ran into cash-flow problems early on. "No matter how fast our sales went up, our expenses kept rising, and it seemed that I never knew what cash was really enter-ing and leaving the company," president John Benko recalls.

His solution: "I started monitoring the hell out of cash flow -- and I decided to come up with my own realistic definition of what cash flow meant to our company." Although his definition wouldn't fly with most accountants, it makes great management sense: "I base my cash-flow reports strictly on aftertax profit numbers. So if I collect a $50,000 receivable that I know represents $20,000 of aftertax profit for the company after all my expenses have been factored in, then I record $20,000 worth of cash flow coming in."

Monitoring aftertax cash flow, rather than simply tracking the way dollars enter and leave his company's coffers, is admittedly quite conservative. After all, ideally, companies collect their receivables in 30 days and pay off their own related bills only 15 or 30 days later, once they factor in the profits from their investment float. So there wouldn't be any real benefit to focusing on net-profit cash flow. But Benko knows that in tough economic climates like this one, he can't count on that kind of positive cash-flow balance to just fall into place -- especially if sales also come under pressure. "In a small company, you can't rely on a large accumulated investment float to help when sales slow," he says. "All you've really got is whatever profits you've already collected -- and that's what I'm really monitoring."

Benko is convinced his more cautious approach is largely responsible for keeping his seven-year-old company in a positive cash-flow position throughout the recent recession. "I track my own definition of cash inflows on a weekly basis," he says. "Then I'll coordinate my expenditures and time our payables according to those numbers."

When the economy recovers, Benko has no intention of changing his system. "Why switch? This system has never made me pass up an opportunity -- in fact, it's helped me strengthen my cash flow so much that I've been able to contemplate all kinds of growth options, including a recent $325,000 bid on a bankrupt company whose assets were worth nearly 10 times that much."

And Benko can count on another benefit: it's a great way of maintaining a profitable pricing discipline.

-- Jill Andresky Fraser

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