7 Ideas to Help Your Cash Flow

7 Ideas to Help Your Cash Flow: Analyst’s Perspective

Some people don’t like to hear the phrase, Cash Flow Is King. That is understandable, but usually it is not because of their dislike for a monarchy. Usually, it is because they have a lack of cash and hate being reminded of it. Welcome to the club.  

However, that does not change the reality that very few things are more important to a business than its cash flow. Here are ways of keeping yourself and the team motivated to keep the cash flow healthy – that is a wise recipe for longevity.

1. Plan
2. Pre pay – yes,
3. Sources of funding
4. Monitor
5. GIGO – CICO
6. Penny wise and pound wiser
7. Interest free leverage – Buffet’s way

1. ‘Planning is boring,’ I can almost hear you say. That is why you need to learn to plan in a quick and dirty fashion – and yes using your analyst makes good sense. People spend too much time on the details, and miss the big picture. If you answer the questions in the rest of this list, it is likely that you can have a ‘plan’ in place for your owner-operated business. And remember the analyst’s mantra, “failing to plan, is planning to fail.’
2. Pre-Pay stuff. “What? You want me to improve my cashflow by prepaying? That doesn’t make sense, right?” Hang with me for a second. If you pay your credit card ahead of time, say a week or so, then you get free credit from the time you bought items, until the time you paid. That could be 40 days, even if it is less, in many businesses, that is ‘free float’. And you are building your credit score (reputation) which will likely get you an increased margin with the credit card company. But if you can’t pay your credit card ahead of time, this can be an expensive lesson, so proceed with caution!
3. The source of your funding is important. Governments are swift to impose fines and penalties for late payments these days. So, do not go there. But we always found it was better to delay a big supplier, say the rent, rather than 20 smaller suppliers. However, you need to have a reason, and a plan when the landlord comes calling. And prepaying a little when cash flow is good can buy tremendous goodwill when you may need it.
4. Monitoring cash is the easiest way to improve your cash flow. Ensuring that deposits are made on time; that if something is missing you track it down, and ensuring that bills are paid on a timely basis. Monitoring your bank balance to see that checks are not bouncing is business suicide. If you are there, stop reading, call your analyst immediately and formulate a plan. The sooner the better.
5. Are you familiar with GIGO? Garbage In, Garbage Out – so chanted a management accountant professor many moons ago. Information, results, effort and cash can all be substituted for Garbage, as Cash In, Cash Out. If you need to put cash into your business for it to cash flow, cash is seeping out somewhere. You need to find it, stop it, and fix it. It is often a ‘pricing’ issue. You are doing too much and /or charging too little. Start there.
6. Too often we hear of owners complaining about the cost of paperclips. No, not an actual paperclip but something like that. All while spending hundreds, if not thousands, on phones, professionals, status symbols, and vehicles. Step back. Do you really need it all? It is okay to address the cost of paperclips, but only if you are being wise about the rest of the business. Are your promotional efforts bearing fruit? Are your expansion plans working? Are your people delivering? Oh, being wise is almost always about managing and working with your people.
7. Finally, finding ‘interest free’ leverage is a wise way to increase your cash flow. In Buffet’s case he learnt to make money from insurance premiums (via investing in longer term securities) instead of just earning next to zero in interest revenue. Deferring taxes is another example of getting an ‘interest free’ loan from the government. Perhaps your business can sell prepaid gift cards? The possibilities can be near endless, and the opportunity to improve your cash flow significant.

Ask yourself, “Are you ready to start planning for better cash flow?” Like much that is important in life, cash flow management does not just happen, you have to work at it. Get with the flow.  

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Cash Flow Is King: Analyst’s Perspective

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