Got Cash? 10 Cash Survival Tips

“If you know how to spend less than you get, you have the philosopher’s stone”   – Benjamin Franklin

Cash is the lifeblood of any business. It is essential for a company’s survival and is necessary for funding growth. Most small businesses recognize very early on that “Cash is King”!  Business owners are therefore always looking for ways to optimize the balancing act of reducing or deferring their payments and accelerating their receipts to increase their cash position. Follow these 10 important tips to learn how to increase your cash flow.

Cash Receipts

  • On the accounts receivable side, it’s important to collect cash as quickly as possible because unpaid invoices won’t pay the bills. You cannot expect to be paid promptly if you don’t invoice promptly. Do not wait until the end of the month to send invoices! Even better, get your customers’ agreement to exclusively bill them electronically. An e-invoice doesn’t cost you postage and it doesn’t take 3 days for the customer to receive it.
  • Re-examine your pricing (how long has it been?) Make sure that your prices haven’t dropped below the competition and have kept up with the industry. Customers will accept, and actually expect, small price increases over time if they are in line with the industry.
  • Consider whether it is appropriate in your industry to ask for a partial payment upfront. For example, if you have to lay out cash for expensive materials before a job is done (i.e., a construction project), then it is generally acceptable to invoice the customer for materials in advance.
  • Re-examine your credit policy, (or establish one – most small businesses don’t have one!) Extend payment terms only to customers who are credit worthy with a good payment history. Start new accounts off with shorter terms – you can always extend the terms as they prove to be dependable.
  • In a slow economy like ours, it’s common for customers to push and exceed the limits of the standard “net 30 days” terms.  Consider offering a discount for early payment. Offer terms such as “1/10 – net 30” or even “2/10 net 30”, which offers customers a 1% or 2% discount for paying in 10 days. Be creative and find options that can help serve you and your customer. Remember, if you don’t manage debtors, they will begin to manage you!

Cash Payments

  • Create a Cash-In / Cash-Out Budget. Include specific due dates for payables as well as receivables. Although the balance between the two won’t always be predictable, a cash budget will give you a pretty accurate picture as to where you stand cash-wise.
  • Next, look at your accounts payable. Managing vendor credit requires developing good ongoing relationships with your key vendors. Negotiate for factors such as extended payment terms or a larger credit limit. When a vendor does extend your terms from 30 to 60 days, make sure your check is in their hands on day 59. Help the vendor validate his decision; a vendor that works with you is a key business partner.
  • Have at least 2 vendors for most purchased goods so you can leverage purchases among the vendors based upon pricing, credit limits and extended terms. Only buy in bulk if you think you’ll use the additional supplies in a reasonable amount of time.
    • Reduce your “fixed costs”, (those expenses which don’t change from month to month). Negotiate with your landlord to lower or defer your monthly rent payment, as this is often a business’s largest single monthly outflow. Examine office supplies, travel, and staff expenses and find ways to reduce these outflows.
    • Take a close look at your inventory. Avoid the cash drain of overstocking! Most business owners vigilantly avoid stock outs from fear of losing a sale, but don’t think about the loss of cash from overstocking inventory.

Make sure you utilize the above tips and maximize your cash flow. You’ll be glad you did!

Randy Donaldson/Business Consultant 770-535-5415


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