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.
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