Managing your cash flow

Whether you are a large corporation or a small business getting off the ground, the management of cash flow is key to survival. 63 percent of new businesses don't survive six years - and most work at home individuals fail within six months. Most people neglect managing their cash flow until it is way too late.

This article looks at ways to manage your cash flow effectively by getting money sooner from customers, waiting to pay bills until the last possible moment, keeping money in one centralized location, managing your accounts payable, receivable and inventories effectively, and making your money work for you.These tips come from the well acclaimed Les Masonson, Author o f Cash, Cash, Cash: The Three Principles of Business Survival and Success.

First, let's look at collecting money owed to you in a fast and efficient manner.Below are a list of tips and suggestions to help you do this.

• Include making it easy and timely for customers to place orders with you.The faster and easier they can order the product the sooner you can retrieve payment.


• Send out your invoice at the same time you send out your product.


• Make sure you have a due date indicated very clearly on your invoice and that the time allotted is sufficient for them to pay but short enough for you to collect quickly.


• Specify penalties for late payments.Follow up with clients that are delinquent.


• Check the financial health of customers before offering them any kind of credit


• Once payment comes in, make sure to deposit any checks received the same day they come in.


• Try not to use the banks Teller machines or night drop boxes, they don't really provide you evidence that you deposited the money.


• You can offer a small incentive discount for early payment like 1.5% off if paid within 10 days.


• Don't send out new merchandise until old receivables are paid.

Next, let's look at waiting to pay until absolutely necessary. Here are a few suggestions to help you hold on to your money longer.

• Pay your invoices the last day they are due.


• Try to mail payment out on Thursday or Friday to allow for a few extra days floating during the weekend.


• Use business credit cards for small expenses since they provide you with 25 days for repayment.


• Stay on top of your bank and your disbursements.Banks do make mistakes from time to time.

Finally, remember that inventory isn't cash. Make sure you are forecasting as accurately as possible so you don't have a huge inventory on hand. Try to hold off ordering until it is absolutely necessary without disrupting business. Find a way of getting rid of obsolete inventory. Make sure that you keep money on hand for emergent situations for your business. Try not to keep too much money in your accounts.Instead keep a healthy balance of cash and use the rest to pay off loans or outstanding debts.

There are a few warning signs that can help you determine if your cash flow management needs some adjustment. First are your sales. Is it increasing, decreasing or remaining constant?Next is your bank balance. Is it getting low?Third involves the volume of your receivables. How much do customers owe you?Is the amount getting out of hand? How much past due are certain clients?Lastly, looks at your payables. How much do you owe?Is it more than what you are bringing in?

Use the tips and suggestions provided above and watch the warning signs closely.If you keep on top of your cash flow management you have a greater chance at success with your business.