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Six Actions You Can Take NOW to Help Your Cash Flow - Part II - Jun 10, 2009

Posted by: Linda J. Donegan in

On my last blog we examined three of the six actions to be taken now to help your cash flow. In this blog we will examine the final three actions. Times are tough right now; cash is king. As I said in the last blog, no cash, no business. It really is just that simple. Think of your business cash flow as you do your personal financial cash flow. When you are grocery shopping, would you pay more for a product if you could walk across the street and get it on sale at a reduced price. Of course you wouldn't. Same goes for business.

1. Put together a quick budget. So many business owners do not anticipate their Profit and Loss. I believe there is an old saying that says, "if you don't know where you are going, any path will do." This applies to business also. If a business does not have a budget it does not know where it will end up. And don't say, "oh, I've been at this so long I know exactly where I am and what will happen." To that I say, "bull"! No one is that good. Without anticipating what will happen (in other words "what if scenarios") "stuff happens" and you can't project how it will affect you. Try budgeting at a high level. Just budget major expenses. Sales, COS, Payroll, Occupancy expense, Office expense, Insurances, etc.; this will give you a good start.

A client never budgeted anything in their business. We put in a high level budget to monitor major revenue and expenses such as Payroll, Occupancy, Office, etc. After the first month, we did a budget to actual comparison. His eyes popped when he saw Payroll expense was way above what we had projected. With a little investigation we found that the employees were working overtime on jobs that did not need overtime. The situation was addressed immediately and cash flow improved.

Don't think for a second that you know what is going on in every corner of your business. A budget can help you monitor that.

2. Monitor employee theft. I am so sorry to say that 92% of small to mid-market businesses will experience employee theft. It can be as small as stealing a pencil or as large as thousands or hundreds of thousands of dollars. Also it is a sad testament that usually the employee you least suspect will be the one stealing. Small businesses are more susceptible to theft because there are "more hands in the till" so to speak. Be careful, double check, make surprise visits, and require reviewing the reconciliations.

A client swore that no one was stealing from her. I suspected that one employee (who was the owner's "best friend") had too much access to financial software and all the passwords. After looking closely at areas that were vulnerable, I discovered that the employee was buying items at the client's store and putting them on her charge card. Two days after the charge, the employee would access the register system (in the privacy of her office) and reverse the charges. Naturally she did not return the items. When confronted with the evidence the owner was devastated.

When it comes to money, especially in hard economic times, people will change. Keep a close watch over your assets, and make sure more than one pair of eyes is checking everything.

3. Visit or contact old customers. Ever heard the phrase "picking the low hanging fruit?" Old customers that have done business with you before, and were happy with their product/service can be low hanging fruit for you. During this time you need sales fast. Although the sweetest fruit may be at the top of the tree, there is no need to ignore the most accessible customers. Review your prior customer/client list and identify the ones you have not heard from is a while. Call them, ask how they are doing, tell them you would love to see them and ask how you can help them.

A client was frustrated because sales were stagnant and during the economic downturn she was having a hard time finding new customers. She identified clients she had not done business with in a while, physically went to visit them and took them donuts and coffee. She was amazed how many placed orders and she had her best month ever.

Your customers are very busy also. Maybe they just need to be reminded that you are there and give good service. Even if they don't place an order immediately, they will remember you took the time to contact them and you will hear from them soon.

I hope these six suggestions give you some thought and provide some solid actions you can take NOW to help cash flow. Get moving!!