(Add to Favorites | View All Articles | Resource Directory)
|
|
|
Keep the cash flowing inward7 Tips to Improving Your Cash FlowCash is King... That is what everyone tells us and it is true! You cannot function successfully in any business without proper cash flow. So if this Cash Principle is so well known, then why is it that so many businesses struggle? Sometimes the obvious is not always so obvious when you are entrenched in running the day-to-day aspects of your business. Here are 7 Tips to Improve Your Cash Flow! 1. Cash and Carry. Operate a cash and carry type business versus worrying about receivables. The best business plan is one where customers pay at the time of purchase so you don't have to worry about invoicing or collection procedures. Invoicing and collections take up valuable time, so you want to come up with creative ways to incentivize payment immediately. Set the ground rules in the beginning so your clients know what you expect. 2. Receivables Collection. Collect your receivables in a prompt manner. Don't let them hang out there forever until your customers decide they want to pay you. Being a good steward of your business is "good business", so have a process in place for invoicing and collections. The longer your receivables are outstanding, the less likely you are to collect. You don't have to be mean and rough to collect promptly from your clients. A good rule of thumb is that you should always have a due date on the invoice and then send out a follow-up statement within 10 to 30 days from the due date. Each industry and business environment has different insights as to what is the "ideal" time. I would not send follow-up correspondence any sooner than 10 days past due. Payment may just be delayed by the mail; however, waiting longer than 30 days is too long. If you have not received payment within 45 to 60 days of the due date, then a phone call should be made to follow-up with your customer. Accounts that go past due 90 or more days should be taken to the next level of collections with an outside agency, internal collection "ninja" or any other mode you have established for collections. Find what works best for your business and stick to it. Each day that you are delayed in receiving payment is an additional cost of doing business. Time is money. 3. Receivables Funding. Implement an accounts receivable funding program. Factoring of accounts receivable has become very popular and it can be a great way of keeping the cash flowing. Businesses who deal with large businesses or government agencies lend themselves to utilizing factoring programs. If your clientele is made up of small businesses or individuals, you may find it more difficult to establish an accounts receivable funding program. Why? Funding companies are monitoring risk. There is less risk with larger companies or government agencies. Or so they think! 4. Vendors. Negotiate terms with your vendors to help delay the outflow of cash payments. Lots of vendors have payment terms where you can delay the payment until end of the month or maybe even up to 60 days. This allows you a little float time to use their money while you are working on your project. Then hopefully you'll receive payment from your customers prior to needing to pay for the products you purchased. Some companies also go the route of consignment. Then you are selling someone else's goods and don't have your money wrapped up in inventory. This option can help you increase your product offerings without having to invest large amounts of money in inventory. 5. Customer Deposits. Have your customers pay a deposit prior to the start of the job. This will help you cover your upfront costs as you start the projects. It's very common to have a deposit with the signing of your contract. It decreases the risk associated with nonpayment because you've received a portion up front. You can also implement periodic payments throughout the contract vs. a single payment upon completion of the project so that cash is flowing in consistently. 6. Revolving Credit Line. Establish a revolving line of credit through a lender to help you with potential cash flow crunches. Especially if the amount of savings from prompt pay discounts are greater than the financing charge from the lender or the lender's financing charge is less than what your vendors might charge for late payments. This helps give your business a safety net so that you can continue to operate during those times when you are offered great specials if you buy today but may not have extra cash available. 7. Savings Fund. Establish a savings fund to help you operate through slow times. Most businesses have swings in their business flow and managing cash effectively can be a challenge. Store away extra during the good times to help alleviate issues during the slow season. I know this sounds easier than it is, but if you take out a percentage each month and transfer it to a savings account then it will be "out of sight and out of mind." You may find that each of these 7 tips is viable for your business, or maybe only 1 or 2. Anything that you can do to focus on better cash flow will provide benefits to your business. The worst thing you can do is sit back and "hope" that things go well. Look around! See those "CLOSED" signs on the surrounding shop windows? They played the "hope" game and lost. What are you going to do? Hope? No?implement a plan for cash flow management starting now. Copyright 2005 Pam Newman Pam Newman helps business owners keep money from slipping through their fingers. Pam is a Certified Management Accountant, Certified QuickBooks ProAdvisor, and Author of Out of the Red and Unlocking the Secrets of QuickBooks. Pam believes that it is important for you to understand the financial picture of your business, so that you can make informed decisions. For more information, please visit http://www.rppc.net
MORE RESOURCES: News provided by Yahoo! News and Google News Small Biz Sentiment Slips In January - Advertising Specialty Institute (press release) Decline of small business hurts recovery, jobs growth Lt. Governor on pro-business legislation: 'We're on the cusp of changing our ... - Albuquerque Business First GST red tape hurting business, economy Fla. lawmakers propose small biz sales tax holiday - First Coast News Small Biz in a Digital Age: Analytics - Know Your Options - GoLocal Worcester Small Biz Breakfast on Changing Technology Trends - HamletHub Stratford Library offers seminar series for small business owners Judge tells American Express it can't bully small biz - Crain's New York Business AIR MILES for Business celebrates Canada's outstanding entrepreneurs at the 2015 Small Business Achievement Awards |
|
|
|
RELATED ARTICLES
Your Practice is Only as Valuable as Your Referral Base Many physical therapists in private practice have the appearance of a very successful business that is built on the backs of about four to five doctors. Now if anything would happen to any of these guys, the value of these practices would drop markedly. How to Remove Stress from Owning a Business... Forever! I meet and talk to hundreds and hundreds of business owners every year and do you know what I've discovered? Virtually all of them are regularly suffering from stress.It dawned on me while running a seminar one day. Business Relationships Defined What makes a business relationship?What really makes a business relationship? This may be very hard to define as it goes beyond just meeting the person and chatting about something you have in common. A relationship is developed over a period of time and usually does not happen instantly. Tell Me a Story: A Simple But Powerful Tool to Build Your Business Everyone loves a good story. Whether it's the story of your vacation to an exotic place, the story of how you met your spouse, or the story of your small business, people get drawn in and feel involved. Deciding what sort of business to start If you're serious about wanting to start a business, the first thing you want to do is take the time to understand what really makes you tick. Where do you get your drive? What gets you in a "zone?"However, there's a lot more to figuring out the BEST business idea that will make you more money and give you more freedom to enjoy more success in your life. Surviving in a tumultuous economy Contrary to popular belief, small businesses can survive a crazy economy by taking some proactive steps. Provide spectacular customer service -- every time. Work fascintes me - I can watch it for hours I love work, I can watch it all day.I am not scared of work, I have been known to approach within arm's length of it on a number of occasions. Becoming Recession Proof A lot of business owners I've spoken with lately have commented how their business is slow because of "the recession." If you are one of these people, you might want to reconsider your position. Secrets Revealed To Having The Most Professional Staff On The Telephone! Do you have all the customers your business can use?The seemingly simple task of taking phone calls is a hidden liability for not just some, but most businesses. You've invested precious dollars in advertising and marketing. Competing without a corporate-sized advertising budget Everyday, customers and business owners are bombarded with billboards, logos, print and electronic ads from huge corporations. With annual ad budgets that are more than our businesses' SALES in an entire year, our small independent businesses are getting squeezed out of consumers minds (and wallets) more and more each year. Small Business Failures in America - Cash Flow Issues We are noticing an increase in the length of time it takes Large corporations to pay on their invoices to our team. Fortune 500s are tending to pay their vendors more slowly, which will hurt the already strapped small businesses in America. Does Your Business Need a Toll-Free 800 Number? Should your business have a toll free number for customers to make sales, service and billing inquirers? The industry began in the early 1970's and today most customers expect you to have it. Providing a toll free line can bring in a number of benefits to your business. What to look for when seeking a Virtual Assistant Articles abound advising the business community how to properly screen when looking for a Virtual Assistant (VA). Unfortunately, some of the advice may lead you astray, as it often ignores the fact that VAs are not employees but independent contractors providing professional business to business (B2B) services. More Business Card Marketing If you are worried about how many different business cards you should carry, let me speak from experience, you need only ONE!The best way to confuse a potential customer is to present them with more than one business card. You may be doing a number of things and have cards for each one (even have several businesses where you do work) but you need to focus on what it is that you do best. How to Profit from a Concrete Roof Tile Business Concrete Roof Tile Business: During the 2004 summer season, storms plagued the United States. Damages from the Hurricanes in Florida alone sent resources in the southern states scrambling. Look Out for that Great Accountant There are many factors to be considered when you are trying to select the accountant who is right for you. In other words how to find that good one. Explode Your Consulting Income Here are just a few ways to increase and diversify your income from your consulting business.1. Wichita Kansas is a Great Place to Run a Business We love Wichita because it has great all round weather except during ice storms and the once in a while Tornado threat, which could carry away you best workers to meet Dorothy. 225 sunny days a year snow about 5 days a year. Sample; Territory Reduction Policy for a Franchise Company I propose this thought on the subject of Franchisee territory reduction based on performance for a Mobile Business Model. Please read the sample policy below as it explains the reasoning and methodologies considered to extend brand without risking underdeveloped territory. Why Clean Mobile Homes for a Business? Manufactured and Mobile Home owners know that the weather this year will be quite harsh. It's imperative these owners to clean out rain gutters and debris from on top of their homes.
|
| Home | Site Map | Privacy Statement | More Articles |
| © 2006 |