Successful Cash Flow Control

Managing cash in today’s economy is essential to business success. Cash flow is vital but how to control it? Here are some simple tips to help you manage your cash flow a little better.

1. If you extend credit, be sure to monitor accounts receivable regularly. Have a person who is dedicated to watching the A/R at least on a weekly basis. If necessary, tighten the credit policy based on a customers’ history. It’s far better to lose a sale then to not get paid for service or product already delivered.

2. Avoid auto pay for bill payments. It can be easy and tempting to set up all of your bills on auto pay but what happens when you fall a little short of cash one month? Yep, everything either bounces or you rack up hundreds in overdraft fees. A better idea, use the on-line bill payment features but you decide when it gets deducted. This allows you to pay things slightly late if you have to but avoid bank fees that can overdraw your bank account quickly. In some cases the late fee for the bill you had on auto pay is lower than the overdraft charge.

3. If you are not able to pay a bill, it’s best to contact your creditors and be honest and up front with them. Avoiding their calls and letters is provoking and can result in more late fees or legal action. Dealing with the issue pro-actively helps in preserving your future credit and your vendor relationships. This advice rings especially true if you owe any back taxes. Call or write the tax agency without delay to make a payment plan and let them know you are not evading your payments.

4. Know what your break even point is for cash flow. Do you know what your minimum monthly cash requirements are to meet basic operating expenses and debt payments? If you don’t meet the minimum, how will the shortfall be met? Answering these questions is an absolute necessity.

5. If cash flow is volatile, keep your payments flexible. It may not be best to sign up for any long-term contracts or leases if you can’t project solid cash flow in the near future.

6. Have a contingency plan for each stage of your business. If sales are x, then we will do y. Keep the plan flexible and be aware of your situation at all times.

Free offer! E-mail me a request for your free cash management template. This Excel spreadsheet helps you manage your weekly cash needs and can be modified for business or personal use.

Yes, I would like to have a copy of your Cash Management Spreadsheet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: