Ten Ideas to Enhance Cash Flow
by Alan L. Olsen, CPA, MBA (tax)
Greenstein Rogoff Olsen & Co. LLP
Managing cash flow is what separates good companies from the truly successful ones.
Indeed, your ability to monitor the cash flow of your business can be the vital
difference between profit and loss.
Here are 10 ideas to enhance cash flow:
Assess Your Risk Up Front
When you do work without being paid up front, you are extending credit. Discuss
your billing procedures with your customers up front. "We expect payment in 30 days;
is that a problem?" If it is, you need to know ahead of time and make an informed
decision about whether you really want to loan your new customer money.
Customers do not pay for what they have not yet been billed. Although many owners
believe they have efficient billing procedures, our experience is that delayed billing
is a primary cause of poor cash flow. You cannot bill soon enough!
Confusing bills provide your clients with an opportunity to delay paying you. Furthermore,
be very specific about the payment terms and stick to them. If you expect payment
in 30 days, say so; and detail what happens if you are not paid. Do not fear losing
business! If you are not now getting paid for work you have done, what is left to
Make Paying Easier
Do you accept credit cards? If not, it is time you evaluated this opportunity. Do
you enclose a postage-paid return envelope with your bill to expedite payment?
Have you considered offering discounts for prompt payment? When we work with clients,
we look at every aspect of their billing process.
Collect Your Bills
Receivables are loans your company provides to your customers or clients. Unless
you really want to be a banker, develop a protocol for your collection effort that
begins the moment a bill leaves your company. History has demonstrated that the
lack of a well-developed collection protocol is the primary cause of poor cash flow.
Cut Unnecessary Expenses
Reduce the cash that is going out. Carefully examine your fixed expenses. Look at
your utility bills and implement a conservation program. Review your insurance premiums
to be sure you are not over-insured. How many subscriptions and memberships are
Time Your Payments Carefully
Review all of your vendor bills to ensure that you are taking advantage of any discounts.
We can help you analyze which discounts are best for you. Delay all non-discounted
bills as long as possible.
Put Your Cash to Work
First, make daily deposits! Second, make your deposits before the bank stops its
daily transactions (2:00 PM - 3:00 PM). If your mail arrives late, get a post office
box to speed up delivery. Finally, transfer idle cash into interest-bearing accounts.
Even at 2% or 3%, this money adds up.
Evaluate Your Payroll Schedule
Consider changing your payroll from weekly to biweekly or monthly. Reducing the
amount of payrolls, in turn, reduces payroll tax deposits. Consider payroll advances
to help sway employee resistance.
Without exception, planning ahead is the most crucial aspect of cash flow management.
Prepare a cash flow budget based on last year's history, and you can begin to develop
a game plan.
Talking to your banker before you need money will provide you a better working relationship
and better rates. If you need assistance in developing a cash flow budget
or if you would like us to introduce you to a banker who understands cash flow,
call us today.
Cash flow management involves analyzing risk and requires both short- and long-term
approaches. As a business owner, you know how crucial it is to maintain your profit
margins. This guide was developed to assist you in ensuring that cash flow problems
do not siphon off those profits unnecessarily.
Although we present a number of ideas here, they are general in nature in order
to give a wide variety of insights into managing cash flow. In truth, cash flow
management involves analyzing risk and requires both short- and long-term approaches.
We will be happy to develop a specific approach for you and your business.