Money & Finance
Ask SCORE                                                                        Word Count 423

Improve Cash Flow with These Simple Steps

Without a steady flow of cash to cover expenses, your company can quickly
stumble.  

Cash flow troubles can develop even when sales seem strong. Facing a
continuous cash crunch makes it difficult to conduct your business properly. And
while it may be tempting to seek out fancy financial formulas for predicting and
tracking business cash flow, the basics tend to be plain common sense for most
small businesses.

The object is to make certain that more cash enters your business than exits your
bank account. First you need to translate sales into real money as quickly as
possible. Once you’ve collected the cash, your business needs to guard it.
Surprises, such as slow or non-paying customers and unexpected expenses, are
your worst cash flow enemies.

One way to shift cash your way is to ask for all or a portion of payment up front.
Asking for at least a deposit in advance is a great way to jump-start your cash flow.
And if you establish the policy fairly and properly, it shouldn’t alienate good
customers.  

Accepting credit card payments also can help, so you may want to sign up for a
merchant account that allows you to do this. Or, if you already have one, encourage
customers to use this option more often. You do pay a fee for this. But credit cards
are a great way to speed cash into your account, and the cost is generally small.

You may need to manage “receivables” more closely. This is the money that
customers owe to you for products or services you’ve delivered. Create a detailed
“aging” schedule of what you are owed, by whom and for how long. Place phone
calls to overdue accounts, focusing first on the largest amounts due. Offering a
discount can bring some quick cash in the door, but play this card only after you’ve
called the customer to ask for full payment.

Finally, don’t overlook the power of an operating budget. Note specific due dates
for payables as well as receivables. Although the balance between the two won’t
always be predictable, the budget can give you a snapshot of where your business
stands in cash flow.

Cash flow is just one critical financial issue facing your small business. To learn
more, contact SCORE "Counselors to America's Small Business." SCORE is a
nonprofit organization of more than 10,500 volunteer business counselors who
provide free, confidential business counseling and training workshops to small
business owners. Go to www.scoredm.org on the web or call (515) 284-4760
between the hours of 10:00 A.M. and 3:00 P.M. Monday through Friday.