Some Bad Advice on Cash Flow Management

Getting good advice on how to implement cashflow management practices can be complicated. Improvements to cashflow management are available for all aspects of your business. The tricky part is figuring out what to start with and what practices aren’t worth the time and effort for your business.

The biggest challenge is that some cash management ideas can actually put you in a worse cash position than when you started.

Conventional Wisdom Isn’t Always Wise

You could start today by implementing some easy things that would give your business quick additional cash. But which easy ideas should you implement? More important, are they right for your business?

I’ve found articles written on each of these ideas. The authors would have you believe that each idea should be implemented by every business:

  • Start charging everything that you can to a credit card. It will give you on average about 30 days to send your cash to the credit card company and not be charged any...
Continue Reading...

Unconventional Wisdom: Spend Your Cash Quickly

In my article “Some Bad Advice on Cash Flow Management” I mentioned that sometimes conventional wisdom isn’t very wise. In this article, I am going to bust the myth that you should always pay bills as slowly as possible and hold onto your cash until the last possible moment.

There are at least seven instances when you may want to spend your cash quickly:

  1. Early payment discounts
  2. Cash discounts
  3. Volume discounts
  4. Annual payment discounts
  5. Create solid vendor relationships
  6. Hire and retain hard to find employees
  7. Manage your debt

Early Payment Discounts

Some companies will give you the option of either paying in 30 days or paying more quickly, with a discount. The most common discount is 2% if you pay within 10 days, but if you don’t, then the full amount is due in 30 days. This is known as “2/10 net 30.”

Why this a good deal if you have the cash to pay early? It’s like earning 36% interest on your money! The vendor is basically saying...

Continue Reading...

Cash Forecast vs. Cash Flow vs. Cash Management– Good Tools

Most people think that cash management, cash flow, and cash forecast are the same - they are not. If you don’t know the difference, you may have a false sense of security about where you are and the progress you are making.

Even if you do know the differences between the three, you also need to know how to use them to run your business.

I’ll give you a rundown of each one, what they are used for, and some key ideas for using them to run your business.

What is a “Cash Forecast” and What is It Good For?

A cash forecast is a way to predict when cash is coming in and going out, based on your business model. I like to call this “business modeling” because it creates a sense of how your business is run. Sometimes it is also called “cash modeling.”

A cash forecast is also a predictive model of your cash-based profit and loss statement.

Cash forecasts are usually set-up for monthly calculations, which go out 1-3 years. They use cash-basis...

Continue Reading...

Seven Steps to Implementing Cashflow Management in Your Business

In my last article, “Some Bad, and Some Good, Advice on Cash Flow Management,” I told you I’d give you the details for the seven steps to implement a sound cash management program.

I mentioned that people sometimes want to move too quickly. Generally, their problem isn’t what they think it is (see my article “Keep Digging. The Problem with Your Cash Flow Isn't What You Think It Is.”)

I advise everyone to take a systematic approach.

In this article I’ll go into more detail on how to implement a solid cash management program in any company. Here are the seven steps:

  1. Put your bookkeeping in order.
  2. Analyze your financial reports.
  3. Find and implement quick fixes.
  4. Implement bigger projects. 
  5. Create a cash flow forecast.
  6. Use cash management tools.
  7. Monitor a cash management dashboard.

Step 1: Put your bookkeeping in order. Create a solid foundation.

Most businesses without a professional controller will have significant errors in...

Continue Reading...

10 Cash Flow Management Habits Every Business Owner Must Have

Business owners with good cash management habits are more likely to have a growing, successful business. They have more control over their business’s cash and more time to grow their business by focusing on their business’s unique value-added products and services.

Here are ten (10) habits you can adopt to help put your business on cash management auto-pilot.

The 10 Cash Management Habits

  1. Maintaining up-to-date bookkeeping
  2. Keeping accurate books and records
  3. Structuring a chart of accounts for meaningful reports
  4. Measuring the impact of increasing sales
  5. Using cash management tools
  6. Working with a cash management dashboard
  7. Addressing cash shortages immediately
  8. Spending regular, focused time on cash management 
  9. Maintaining a positive attitude
  10. Asking for help when needed

Habit 1: Maintaining Up to Date Bookkeeping

Up-to-date bookkeeping is critical for knowing where your cash is, where more cash is coming from, and where it needs to go. In other words: bank...

Continue Reading...

The Five Key Mindsets of Good Cash Managers

A business owner’s mindset about cash management is the difference between having enough cash and struggling to meet expenses every day.

When I meet a business owner who struggles with cash flow, I ask, “Tell me about your business?” They can say whatever first comes to mind, and they usually tell me the good things, starting with whatever their business is known for and what’s going well.

  • “Our unique products are awesome! We can’t make enough!”
  • “We carry the best selection in the area and have service to back up the sales.”
  • “We have a contract with the power company that others would kill for.”
  • “Our systems can handle a lot more volume. We’ve figured this out to the last detail.”

People talk forever about the wonderful parts of their businesses. Those areas that the business was built around- marketing, products, software, services… anything that helped them grow sales.

The One Thing that...

Continue Reading...

Cash Management - What it is and what it isn't

I love seeing the wide variety of businesses around the world. It’s one of the reasons that I enjoy working with small to medium sized businesses – there is so much variety and so many ways that people have figured out how to make money. They are so innovative, and it seems like it would be so fun to be part of the team!

These companies generally have:

  • Innovative products and services
  • Great demand-generating marketing
  • A good sales team
  • Operational excellence that is generally close to the skill of the founder

After that the business often has weak spots. They generally lack systems and operations that will allow them to scale, especially when it comes to accounting, finance, and cash management.

Between my experience and the conversations that I’ve had with various accountants, bookkeepers, and business consultants, I’m convinced that 90% or more of small and medium sized businesses don’t have good financial management. This includes basic...

Continue Reading...
Close

50% Complete

Two Step

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.