A 9-point cash flow guide for small businesses.


Here are a 9 steps you can take to increase your cash flow during tough times:

  1. Create a billing schedule. Set up an accounts receivable process to record sales, generate invoices and monthly statements, and track customers' current and past-due balances, To help you bill early and often, create a billing schedule with an accounting software program to act immediately on overdue accounts.

  2. Stretch payables. Take the maximum amount of time allotted (which is often 60-90 days) to pay your suppliers. Think of these terms as an interest-free line of credit from your supplier.

  3. Or take advantage of early payment incentives. If your suppliers offer you a discount for paying early, take them up on it. A 2 percent discount on a 30-day invoice is equal to a 24 percent annual return if the savings were to be invested. If your suppliers don't offer this kind of incentive, ask for it. They may be willing to offer the discount in return for speeding up their receivables.

  4. Track expenses and sales. Each month, compare your projected expenses to your actual expenses. This will help you anticipate the need for more cash and react immediately. It is also important to project your sales revenues for a specified period and spend accordingly. Then monitor your actual sales to make sure they are on track.

  5. Minimize collection risk. Minimize your risk when working with companies with questionable credit. Check references and consider that seasonal cash flow issues or other circumstances may affect customers' credit. If a company is particularly high risk, ask for full or partial pre-payment.

  6. Renegotiate supplier policies. Keep your eye on price-sensitive services, such as insurance, long-distance phone service or your Internet service provider. Regularly examine these bills and call around to make sure you're getting the lowest available: rate.

  7. Manage debt. For a growing...

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