Improving Cash Flow

Introduction

Check List For Improving Cash Flow

Sell for cash or take credit card payments whenever possible.
Establish a line of credit with your bank.
Consider using a Lock Box to speed up collections and deposits.
Establish and Monitor good credit policies.
Prepare Accounts Receivable Ageing Reports and use this tool to follow up on late payments from your customers.
Likewise prepare Accounts Payable Ageing reports and use this tool to schedule your payments to your suppliers and creditors. Pay when due but not early !
Send Monthly Customer Statements.
Be aggressive in your collection efforts when you have to.
Cutoff additional credit sales to customers who are behind on their account payments (put a hold on their account).
Bill promptly and accurately.
Offer early payment discounts to your customers.
Reduce inventory levels and sell off obsolete, slow moving, or damaged merchandise even at a loss (below cost) if you have to.
Lease instead of buy equipment.
Purchase inventory, supplies, and equipment only as needed.
Increase sales.
Increase selling prices.
Tighten or reduce your credit terms extended to your customers if you can.
Take payment discounts on your purchases whenever possible.
Sell off unused equipment and other assets not necessary or being used by your business.
Use accounts receivable financing or factoring to speed up the collection of your sales made with credit terms.
Negotiate and obtain lower payments and interest rates on outstanding loans from banks and other financial institutions.
Review costs and expenses and reduce whenever possible.
As bad as you hate to, if you experience a lull or downturn in your business, you may need to consider temporarily laying off excess (unneeded) employees.
Keep on the lookout and check out new suppliers to see if you can obtain any cost savings or better payment terms without giving up any quality.
Renegotiate for longer credit terms with current suppliers.
Analyze products and divisions to determine if any product lines should be eliminated.
Be alert to any new high margin products that will fit into your "line".
Add late charges or finance charges to late paying customers.
Note:If you do this, be prepared to follow up and have your customers actually pay these charges. Most customers try to ignore and not actually pay these charges.
If you have to, borrow but have a plan for paying back these short term loans.
Follow up promptly and resolve any "bad checks" received from customers.
Get "up front" deposits for customer special orders on any orders you can.
If possible, and you as an owner feel comfortable about your business invest more money as a loan or capital or if a corporation sell additional shares of stock.
Prepare and use Cash Flow Forecasts as a tool for monitoring how well your cash planning is working.

Note:These cash management tasks are continual and on going. Sorry you don't get to perform them once and forget about them.

What's next ?

Cash Terms