Jessie McNair, Women’s Vebgb cashflownture Fund

Proper cash flow management is essential to the success of any business owner. Put another way, poor cash management is the major cause of business failure. Let’s look at what cash flow is, its relation to profits and how to improve it.

There are two kinds of cash flows to define the movement of money in and out of your business:

  • Positive cash flow occurs when you have more money from sales and account receivables coming in than you have going out to cover expenses and accounts payable.
  • Negative cash flow is therefore the opposite—having more cash going out of your business than flowing into it.

Make sure you know the difference between profit and cash flow.
When you understand that profit is simply the amount of revenue—on paper—that you have after the deduction of expenses, you can then appreciate the importance of cash flow. (While the amount of an invoice sent to a customer counts as revenue, you can’t count it as cash until you receive payment.) Tracking cash flow on a weekly basis is the best way to stay on top of it. QuickBooks and other accounting software will generate cash flow statements to help you manage this critical indicator of profitability.

Here are five tips to help you improve cash flow:

  • First, review your invoice template. Is it both polite and specific to what you expect from customers? Here is an example of a good invoice statement:
    Thank you for your business. Please provide payment within 21 days. Late invoices will be charged 1.5% interest monthly.
  • Consider offering a discount to customers if they pay bills before the due date.
  • You might suggest that your suppliers grant you a discount for early payment but be sure this early payment of debt doesn’t create a cash flow shortfall.
  • Before you extend credit to a customer, ask them to complete a credit application. If your customer is another business, request a Dun & Bradstreet report which can give you an indication of how likely that business is to pay bills on time.
  • Is it possible to sell more to existing customers vs. the expense and time to acquire new customers? Probably. Analyzing your customer data may show you the ‘when’ and ‘why’ of purchases, allowing you to reach out to customers at ideal buying times. Retailers who acknowledge a customer’s birthday with a discount are brilliant. How about acknowledging the birthday of their spouses and children; or their best friend? Test this enhancement of a Birthday Club with your top tier of customers and measure the effect of this additional incentive.

You’ll know if you have your cash flow under control if you can answer these two questions each month:

#!: What is my cash flow balance today?
#2: What do I forecast my cash balance to be at the end of the month?

Is it time to consider financing?
Sometimes the solution to cash flow problems is an affordable loan. As an alternative lender, WVF will help you assess your needs, help in the preparation of supporting financial statements and provide cash flow management advisory as well as simple spreadsheets to assist you. Call us today to start the process:
212 563-0499 or email me at