5 Ways to Improve Your Cash Flow for 2011

Even if you didn't learn it in college, you soon learn it in the business school of hard knocks. Cash is king. Cash is the lifeblood of small business. Without it you can't buy inventory, pay your help, or turn on the lights.  So how do you keep more cash coming in than going out?

 

Here are five areas to review in your cash management system to drive your business forward.

 

1. Get a road map. Cash comes from sales, collections of your account receivables, and the sale of assets.  So organizing your billing, receivables and payables is first gear. Make sure you are invoicing clients in a structured and timely manner, that credit cards and checks are processed promptly, and that assets and inventory are kept up to date.

 

Make a timetable for your sources of cash and what you have to do to acquire it, along with payments due. Take a close look. How well are you shifting gears?  You may need to create some road signs -- automatic calendar reminders on billing (for both you and your clients!), online invoicing systems and reminders, or even get outside help.

 

2. Look for your drive-thru options.

Your best, repeat clients are already one of your best sources of cash. Why not offer them an incentive to pay up front? You may be surprised at how many of your customers are willing to pre-pay in exchange for a nominal discount of 2-5%.

 

Depending on your business model and your road map from above, you could create automatic billing for cash-crunch times, offer special sales days to your best customers, or add-on incentives for extra purchases.

 

3. X-out your dead ends.
It may be time to cross those clients off the list who are consistently late. Before you do, though, consider what may be happening at their end of the cash flow and what solution you might propose. You may be able to determine if a different billing cycle, payment method, or due date would solve the problem.

 

4. Check your expenses

In every business there are revenue generating expenses and non-revenue generating expenses. Make sure the cash flow you need to maintain revenue-generating expenses is your top priority. Schedule your brand building activities for later or look for alternative ways to get them done.

 

5. Consider an alternative route

 

In many communities -- Northwest Arkansas included -- local currency programs -- better known as barter -- offer businesses an effective alternative to cash. Armed with your road map and list of expenses, consider where you could re-route your cash flow out. Trading unused inventory or services for local currency could free up cash spent on any number of necessary expenses: from lawyers to office equipment, advertising to business services, perks to payroll processing.  You can't do without cash, of course, but using barter can open up a whole new vista of opportunity.