Maximizing Cash Flow

What business doesn’t want or need better cash flow!!

First you need to review your current cash situation and then forecast out into the future what cash you will have coming in and going out. Most likely you will need to find ways to both increase the flow of cash in as well as decrease your spending.

Some areas to improve cash flow in

Accelerate accounts receivable

1.)   Keep a closer watch on days outstanding, implement a process where a customer is called once a receivable hits x days late.

2.)   If you have longer terms, 45 days or 60 days. Think about changing that and shortening the time, little by little (you don’t want to make a change from 60 to 30 days all at once).

3.)   Offer discounts for payments made within 10 days. I have found this one to be very helpful.

4.)   For a fee there are agencies that will purchase your receivables. This one I would only use as a last resort.  Their fees can be a little too high if your margins aren’t that high to begin with.

Explore relief funding options

              Options such as; loans, grants or other funds and relief made available to small businesses. The Small Business Administration (SBA) can help you find the options available for your specific situation.

Other Options

Explore different business models for your business such as;

                            Online sales

                            Offering remote services

Some areas of improvement to reduce cash out

Lower or defer payments

              Work with lenders, vendors, and government agencies to explore options to defer payments or restructure terms and rates.

Reduce fixed expenses

1.)   Rent – Are you paying more than the average for your area? Can you work in a smaller space or in a different area that’s more economical for you?

2.)   Insurance – If you have been with the same carrier for more than 2 years and you haven’t shopped around. It’s time for a review.

3.)   Payroll – There are a variety of options out there. If you are using a PEO, although this may be convenient because they handle so much of the work for you. You are paying the price for this service. Can you bring payroll inhouse? Can you use a payroll service but with less of the bells and whistles that are included in a PEO?

Current bill status

Are you already behind on paying your bills? Talk with your vendors to work out a payment plan that will keep you on good terms.

Explore options to defer loans and taxes

1.)   Contact lenders to see what your options are.

2.)   Most government agencies will allow you to work out a payment plan. Just make sure you set up a plan that you can live with and then follow through with the agreed upon amount and timing.

Cut back on discretionary spending

Reviewing your expenses to find items what you can live without or live without for a short term can help lessen spending. 

1.)   Recurring Expenses - These are those monthly or quarterly fees, subscriptions, memberships, etc. I always find something here that I’m spending money on that I no longer need or use I just forget to turn it off.

2.)   Marketing and Advertising - Adjust your spending for the next few months.

3.)   Meals and Entertainment – This is another area where you can adjust your spending for a few months.

Whether you are struggling to make ends meet or you just want to increase profits and cash flow these suggestions will help you out.

Were there any surprises here? How are you doing on reviewing your cash flows, do you make it a regular habit or has it been years?