anaging cash flow is what separates good companies from the truly successful ones. Indeed, your ability to monitor the cash flow of your business can be the vital difference between profit and loss.

Here are 10 ideas to enhance cash flow:

   1. Assess Your Risk Up Front


      When you do work without being paid up front, you are extending credit. Discuss your billing procedures with your customers up front. "We expect payment in 30 days; is that a problem?" If it is, you need to know ahead of time and make an informed decision about whether you really want to loan your new customer money.


   2. Bill Immediately


      Customers do not pay for what they have not yet been billed. Although many owners believe they have efficient billing procedures, our experience is that delayed billing is a primary cause of poor cash flow. You cannot bill soon enough!

   3. Bill Thoroughly


      Confusing bills provide your clients with an opportunity to delay paying you. Furthermore, be very specific about the payment terms and stick to them. If you expect payment in 30 days, say so; and detail what happens if you are not paid. Do not fear losing business! If you are not now getting paid for work you have done, what is left to lose?

   4. Make Paying Easier


      Do you accept credit cards? If not, it is time you evaluated this opportunity. Do you enclose a postage-paid return envelope with your bill to expedite payment? Have you considered offering discounts for prompt payment? When we work with clients, we look at every aspect of their billing process.

   5. Collect Your Bills


      Receivables are loans your company provides to your customers or clients. Unless you really want to be a banker, develop a protocol for your collection effort that begins the moment a bill leaves your company. History has demonstrated that the lack of a well-developed collection protocol is the primary cause of poor cash flow.


   6. Cut Unnecessary Expenses


      Reduce the cash that is going out. Carefully examine your fixed expenses. Look at your utility bills and implement a conservation program. Review your insurance premiums to be sure you are not over-insured. How many subscriptions and memberships are really needed?


   7. Time Your Payments Carefully


      Review all of your vendor bills to ensure that you are taking advantage of any discounts. Delay all non-discounted bills as long as possible.


   8. Put Your Cash to Work


      First, make daily deposits! Second, make your deposits before the bank stops its daily transactions (2:00 PM - 3:00 PM). If your mail arrives late, get a post office box to speed up delivery. Finally, transfer idle cash into interest-bearing accounts. Even at 2% or 3%, this money adds up.


   9. Evaluate Your Payroll Schedule


      Consider changing your payroll from weekly to biweekly or monthly. Reducing the amount of payrolls, in turn, reduces payroll tax deposits. Consider payroll advances to help sway employee resistance.


  10. Plan Ahead


      Without exception, planning ahead is the most crucial aspect of cash flow management. Prepare a cash flow budget based on last year's history, and you can begin to develop a game plan.

Talking to your banker before you need money will provide you a better working relationship and better rates. If you need assistance in developing a cash flow budget or if you would like us to introduce you to a banker who understands cash flow, call us today.

Summary

Cash flow management involves analyzing risk and requires both short- and long-term approaches. As a business owner, you know how crucial it is to maintain your profit margins. This guide was developed to assist you in ensuring that cash flow problems do not siphon off those profits unnecessarily.

Although we present a number of ideas here, they are general in nature in order to give a wide variety of insights into managing cash flow. In truth, cash flow management involves analyzing risk and requires both short- and long-term approaches. We will be happy to develop a specific approach for you and your business.

Alan L. Olsen is the managing partner at Greenstein, Rogoff, Olsen & Co., a top Bay Area CPA firm. He focuses on developing innovative strategies for business enterprises and individuals. A specialist in income tax planning, he frequently lectures and writes articles on tax issues for professional organizations and community groups. His website is ranked one of the top in the nation, featuring tax tools and business leadership articles: http://www.groco.com

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