Cash Flow or Bust!  Let’s look at Cash Flow for Small Business.

“The fact is that one of the earliest lessons a Small Business learns is that balance sheets and income statements are Fiction, Cash Flow is Realty!” – Unknown

CASH FLOW MANAGEMENT

You, as a Small Business Owner, know the importance of having adequate Cash Flow to conduct day to day business without interruptions. A well-managed flow of cash–like a strong heart–is usually indicative of a healthy business, while poorly managed cash flow, or a weak heart, can cause problems that affect the entire business.

Nothing is particularly hard if you divide it into small jobs – Henry Ford

The big challenge for you is how to make it happen. Here are some proven ways:

• Keep books well organized and up to date
• Minimize or eliminate Bad Debts
• Sync your Credit terms you have set with your customers with credit terms of you have with suppliers
• Must make good profit margins (Raise Prices?), no repeated losses
• Increase sales
• Dependable cash flow forecasting and analysis
• Slow down business growth rate
• Reduce or eliminate Work In Process and finished goods inventory
• Doing better job on forecasting seasonal demands
• Minimize fixed overhead expenses and get in line with industry standards
• Collection, Collection, Collection
• Implement automated systems with checks and balances
• Don’t go for short term solutions like selling account receivable at discount

A desirable way is the holistic way to look at the entire Value Chain – Starting from Suppliers ending with Customers. The entire top management team – Business Owner, CEO, CFO and Functional Managers like Purchasing, Logistics, Sales, etc. must be involved.

The faster you move goods to a buyer, the faster the buyer will pay for those goods, and that impacts your cash flow. Therefore, you must ask yourself how you can better improve the speed at which your goods exchange hands.

Getting collection is the area where business owners usually look for a quick solution. Some of these traditional but important remedies include:

• Doing customer credit checks. Perform credit checks on all new and non-cash customers.

• Offering term discounts. To encourage customers to pay on time, consider offering term discounts.

• Asking customers to pay by cash or credit card. Rather than sell on term payments, sell on cash or credit card payments. Once you’ve got the cash in hand, deposit the funds immediately.
• Charging late fees. Indicate on your invoice when payment is due, and specify the penalty interest for late payment.

• C.O.D. (Collect On Delivery). C.O.D. delivers cost savings and processing efficiencies that improve cash flow.

• Inventory financing. Have you ever thought about unleashing working capital generated from inventory that traditional banks won’t finance?
• Credit insurance. Credit insurance can help mitigate the risks by protecting the value of your receivables.

To be successful at cash flow management is to make sure all three flows of commerce–goods, information and funds–are working together to accelerate the movement of money through your supply chain.

Connecting Businesses to Cash Flow Management Solutions Providers in the Solutions Mall

If you have not gone through this analysis process and you need help, you should go to Small Business Solutions Shopping Mall to find solution provider(s).

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