Cash is King! Part 2 back to blog
In my last blog, “Cash is King, Part 1,” I talked about a few things to keep in mind as you operate your business and how a profitable business can quickly run out of cash forcing it to be out of business shortly thereafter.
In Part 2 of this blog, I want to talk about six ways to manage and increase small business cash flow.
- Deposit cash balances in interest earning accounts – Something I frequently notice is businesses with large cash balances in their interest-free checking account. Take advantage of that balance by moving excess cash into a savings account that will earn interest. Over time that interest can earn a significant amount of money for your business.
- Sell or retire excess and obsolete equipment or inventory – Many times businesses have inventory that isn’t moving or they hold on to older, unused equipment. Sell that stuff! Earn some extra cash by selling it on eBay, a social media buy/sell/trade group, or simply put up a sale sign in your store.
- Require deposits on large or custom orders – Congratulations! Your business just got that order of a lifetime. Keep in mind that you have to pay for extra supplies before you collect that check. Go ahead and collect some money in advance.
- Stage payments on long-term contracts – Home builders do this the best! They tell buyers up front how much money is needed to complete each phase of a project. You can do the same to ensure your cash flow keeps flowing.
- Offer discounts for quick payments – This is an oldie but goody. Encourage customers to pay faster by offering a 2% discount if they pay within 10 days.
- Send old accounts to a collection agency – You cannot believe how many times I have encouraged clients to send old accounts on to a collection agency. A common response is, “If I send them to a collection agency I will only get 50%.” Isn’t 50% received better than receiving nothing?
These are just a few ideas to help increase the cash flow of your business. If you would like more ideas, please feel free to contact my office.
NOTE: This information should not be considered as tax/legal advice. You should consult your tax/legal advisor regarding your own tax/legal situation.