Thursday, January 6, 2011

18 tactics you can use to improve cash flow:

 Last week’s blog listed 3 simple techniques you can use in your business to improve cash flow. Now, let me add 18 other:

1) Increase sales, particularly those that involve cash or have short payment cycles

2) Reduce direct and indirect costs and overhead expenses

3) Defer discretionary projects which don’t have near-term cash paybacks

4) Increase prices & charge a service fee (which is basically interest) on slow payers

5) Become very selective about granting credit

6) Either obtain partial or full payment on delivery (COD) or receive partial or full cash-in-advance (CIA) for your products or services

7) If the customer doesn’t have sufficient resources, obtain personal guarantees from the principles. (You’ll discover that a creditor generally is willing to pay up, especially if you have a lien on their house or property)

8) Shorten the time when payments are due

9) Immediately bill the customer as soon as the work is done, or better yet send out partial billings for work-in-progress

10) Review your accounts receivables weekly and jump all over any account this is past due

11) If possible, obtain more lenient credit terms from your suppliers

12) If you have enough positive cash flow, take advantage of all credit discounts

13) Reduce inventory levels and control work-in-progress

14) Sell off or return either obsolete or excess inventory

15) Defer non-critical capital & equipment expenditures

16) Sell off non-critical assets

17) Raise additional outside investor equity

18) Convert debt into equity.

Regarding the last item of debt vs. equity, remember that debt is a lot cheaper in the long run than equity. But also remember the adage that “in the long run, we’re all dead”.

As a business owner, you have to pay careful attention to both the technical as well as the financial portions of your business in order to maximize your opportunities for positive cash management.

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