Improve Your Cash Flow: Stop These 4 Overlooked Cash Thieves

Improve Your Cash Flow – Stop These 4 Overlooked Cash Thieves

Cash is king! The number one reason small businesses fail is not because of a lack of sales, it is a lack of cash. As a business owner, when you are looking to turn around your company or expand your operations, the availability of cash is going to be the driving factor in your success. Here are four things you can look at today to help change your cash flow position.

Accounts Receivable

By definition, the money in this account is for services or products you have already provided and you are now waiting for payment. As a small business owner, you tend to know your clients or customers personally and it can be difficult to make even a "soft" collection call. In essence, these people are holding on to your money. You need to make sure it comes to your account.

Action Items: Look at your Accounts Receivable Aging Reports and identify any accounts that are more than 45 days past due. Make a personal "follow up" call to see if they were happy with the product or service you offered. Remind them of their outstanding balance and ask if they need a new copy of your invoice. If you still do not get a payment from them, you will need to adopt a tougher stance.

Vendors

Your vendors provide essential services or products to your business. Unfortunately, companies are prone to impulse shopping just as often as we are in our personal lives. The number of vendors a company has can expand quickly, especially if more than one person has the authority to purchase on behalf of the company. This represents money flying out the door, so you need to have a process to identify if you are getting equal or greater value for those services than the money you are spending.

Action Items: Identify who has the authority to purchase goods and services on behalf of the company and try to reduce that list to a scarce few. Make sure all available discounts are being utilized including bulk purchases. Consolidate your vendor list as much as possible to create deeper relationships and better terms on your purchases. Identify the need for each purchase and how it positively affects the business. If a good or service isn't necessary, cut it immediately and save the cash. Don't be afraid to negotiate aggressively with vendors to get the best deal, but always take into account the full package of the offering not just the cost.

Inventory

Inventory is one of the biggest cash thieves in your business. These items are sitting in a store room or on the sales floor, while you wait for them to turn into cash. The problem is that some of these items simply are never going to sell – at least not at full price. Inventory is something you have already spent your cash on, so it's time to move it off your sales floor and get new items that will sell effectively. Even if you have a service business you have inventory – it's just locked up in the billable hours of your professional team. Get your inventory moving and watch the cash flow improve.

Action Items: Identify items in your inventory that need to be price reduced and aggressively set the price to sell. These items are doing you no good sitting in a store room. Implement or improve a system of identifying buyer behavior at your business and adjust your inventory accordingly. For service only businesses, identify which services or professionals in your business are not selling. Look for replacements that will help fill the available billable hours in your business.

Bank Accounts

I am always surprised how often this area is over looked by business owners. I have seen several companies that had accounts with substantial balances. Yet, these business owners had never taken the time to see if their bank offered an interest bearing account for these deposits. Many businesses had no accounts whatsoever that were earning interest. On the flip side, I've seen several companies that end up paying substantial fees over the year in finance charges and late payments either to vendors or credit card companies. A thirty dollar late payment fee each month may not seem like a big deal, but over the course of the year that can turn into over three hundred dollars – and that is a completely avoidable expense!

Action Items: Review bank statements regularly and look for any unusual charges or bank fees. Look at the interest you are paying on any outstanding loans or credit cards and contact the financial institution to see if there is a way to lower the rate. Contact your bank to find out if you are getting the maximum benefit of their interest bearing checking or mutual fund accounts. Make it a priority to pay your bills on time to avoid any finance charges or late payment fees.

With just a few phone calls you could change the cash flow in your company substantially. Take a hard look at the cash thieves in your business and find ways to get that cash back into your bank account.

Article Source: http://www.articlesbase.com/small-business-articles/improve-your-cash-flow-stop-these-4-overlooked-cash-thieves-4184779.html

Will Eisenbrandt is the owner of VerticalCoach, a life and business coaching firm, where he is dedicated to helping others reach higher and achieve more. "I have never stopped being a student. I continually research, attend classes, and ask questions of everyone I know. When it's appropriate, I share my knowledge through books, articles, classes, one on one consulting and coaching. I've held management and executive positions with several companies, and have been fortunate enough to take that experience and help others reach their goals. " Will can be reached at http://www.verticalcoach.com.