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Improving Cash Flow

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

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