How To Keep Cash Flowing
 By Alex R. Merriman

During these rough economic times, every company is looking for ways to tighten up their financials and improve cash flow. Here are a few simple cash management ideas you can likely put to work in your company right away.

Tighten up collections
Past-due receivables are like an interest-free loan to your customers, and letting them linger is a huge drain on your cash flow.

If your terms are net-30 days and payment doesn’t arrive on time, you should be on the phone with your customer inquiring about it on day 31.

Stretch out payables
This is the flip side of tightening collections.

You should take full advantage of the payment terms your suppliers offer you. If your bills are due in 30 days, there’s only one benefit to you in paying them in 10. That benefit is the option to receive a discount if you pay the bill early. Otherwise, keep your money and let it work for you until the last possible day.

Cut expenses
Get out your magnifying glass and look for any and every expense that can be eliminated or reduced.

Start with little things that can add up fast, like excessive bank fees (monthly maintenance, ATM, overdraft, etc.). Can you bundle your business telephone, wireless and Internet plans to save money? Can you send packages via two- or three-day delivery instead of overnight?

Eliminate waste
Do you have unused (or underused) equipment lying around? Do you have too many costly subscriptions to trade magazines that you could read for free online?

Maybe those items seemed justified when cash was flush but seem like indulgences now. Sell that equipment or cancel those subscriptions now and put the extra cash to more productive uses.

Use your bank’s cash management services
Banks offer a number of services that can help small businesses improve cash flow, including wholesale lockbox.

With this service, your clients mail payments directly to a unique post office box. The bank picks up those payments, then processes and deposits them immediately, rather than you having to drive to the bank and make deposits yourself.

The result is faster availability of your funds and better cash flow.

Delay major purchases
If cash flow is tight right now, it might be smart to put off buying that new computer or piece of equipment. If possible, wait until the credit markets thaw out a bit or you have enough of a cash cushion to buy it outright.

Improve inventory management
When you view your excess inventory literally as cash sitting on the shelf, the benefits of improving inventory management become clear.

Monitor inventory levels continuously based on your historical and projected sales. Minimize stocking all but your best-selling items. Try to stock everything else using just-in-time inventory management, which delivers items as they’re needed, rather than days or weeks in advance.

Get help
Need help managing your cash flow, collecting accounts receivables and saving money for your small business? Here are five AFS benefits you can use:

1. ProTalk—unlimited advice from professional small-business consultants
2. National Credit Systems—a low-cost, effective method for collecting delinquent accounts
3. QuickBooks—financial management software; AFS Members receive a 20-percent discount
4. FedEx & FedEx Office—flexible shipping solutions to save you money with a full array of printing and graphics services
5. FastCollect—collect on delinquent accounts and put cash back in your small business

Benefit availability dependent upon membership level and state of residence and is subject to change.


(Posted July 2009)

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