Call us: (724) 359-5022



TIPS TO INCREASE CASH FLOW

  • By Lauri Paxton
  • 07 Jun, 2013
Does it seem like the busier you are, the slower payment is coming back in?  Here are some tips to increase your cash flow in your business.  Accounts Receivable Turnover (ART) is a measure of the frequency of payment on accounts receivable, the money owed to you by your customers you are waiting to “receive.”  An imbalance of Accounts Payable and Accounts Receivable can create a cash flow crunch.
When extending terms – net 30 or net 15, your customer in all actuality receives a no interest loan from you.  The lower the amount of time extended the quicker customers pay off loans you make to them.  Often this misbalance of cash can lead to a trickle-down effect for small businesses.  Not properly managed, this misbalance can ultimately lead to stunted business growth, the need for extra credit or in slow payment to the business owner’s creditors which will affect their credit score.
How fast are you getting paid?
If your customers purchase goods or services through a purchase order, or you send invoices, the money you are owed is considered a receivable. If you’re a consultant and you perform a service and bill the client later, the bill is a receivable–it is money you are owed but have not been paid.
But a credit card sale used by the customer to make the purchase, allows a business owner to receive payment right away and the credit card company extends the credit.  Although there are credit card fees applied, having money for the sale may have its benefits.
Your payment terms and whether your customers meet those terms affect your cash flow. You may ask for payment on receipt, or within 15 days, or 30 days–whatever makes sense for your business.  Larger organizations may negotiate 60 to 90 day terms.  In essence a small business can float the loan for up to 4 months again they are invoiced.  Sometimes gaining a large client can result in a disaster on the balance sheet.
These are some tips to improve cash flow:
  • Shorten your credit terms, say from net-30 to net-15
  • Require initial deposits to reduce the total amount of credit extended – depending on the circumstance bill the remainder in chunks to receive the majority of payment prior to completion of a project.
  • Improve your billing efficiency so invoices are generated and sent as quickly as possible.  If you’re a small business billing may not be in your top 10 things that happen regularly.  If that’s the case – outsource the service.  Fees for outsourced bookkeeping can easily be justified by the resulting increase in cash flow.
  • Create incentives for rapid payment of invoices such at a 5% discount if paid within 7 days.
  • Work to shift more customers, especially new customers, to pay by credit card or bank transfer. (Sometimes this is as easy as saying, “Can we set you up with a credit card or wire transfer?”)
Realize that credit card payments and fees can run 3% of sales; if you can receive check payments within seven days from the majority of your customers, building in an intentional receivable delay may more than offset the fees you would be charged by the credit card company.
For additional processes and methods to improve cash flow, contact your business banker and/or Paxton Bookkeeping and Tax Services.
 
By Lauri Paxton 16 May, 2017
As summer approaches, you are either the type of business that thrives or pulls back for the slowdown of summer. Summer is a very hit or miss time for businesses depending on what industry you are in, and where you are located.
By Lauri Paxton 15 May, 2017
The American taxes are a pay as you go system. This means that taxes are to be paid throughout the year. Many employees do not realize this, because as an employee, your employer is withholding taxes from your pay check to continuously pay your taxes for you throughout the year.
By Lauri Paxton 11 Apr, 2017
Like many Americans, you most likely have been squirreling money away for years to prepare for the day that you will be able to retire.  We always tell people that you are never too young to start to save for retirement.
By Lauri Paxton 10 Apr, 2017
Are you one of those who are quickly approaching the deadline to file your taxes on April 18 th ?  Don’t panic because you are not the only one.  If you are avoiding filing your taxes based on not being able to pay the full amount you owe, you may want to rethink your strategy.
By Lauri Paxton 16 Mar, 2017
The phone rings. You see a number that you don’t recognize, but pick up the call anyway. An agent claiming to be from the IRS says that you owe back taxes and threatens to arrest you or file a law suit against you if you don’t make an immediate payment over the phone. Thousands of Americans faced this exact situation in 2016. This is a prime example of an IRS scam.
By Lauri Paxton 15 Mar, 2017
If you are one of the thousands of people who started to drive for ride share companies such as Uber or Lyft, then this may be the first year that you are filing your taxes as self-employed. You have enjoyed the ability to make your own schedule, work when you want, and make decisions to help improve your income. But what does all of this mean for your taxes?
By Lauri Paxton 13 Feb, 2017
When you go to your doctor there is a baseline where your medical team will start to determine if you are healthy or if you are in need of medical attention.  Vitals such as blood pressure, temperature, weight, cholesterol etc. are monitored regularly.
By Lauri Paxton 10 Feb, 2017
As the New Year has gotten underway and you finish your tax preparation, it is time to look ahead to the remainder of 2017 and beyond. While all of your company’s financial information is fresh in your head, it is a good time to look back at how far you have come and plan for the next few years.
By Lauri Paxton 20 Jan, 2017
As an entrepreneur you have probably found that traveling is an inevitable part of growing and running your business.  How you spend your time traveling can have an impact on your productivity.  Whether you are running down the street to a meeting or traveling across the country to work with a client, smart and efficient traveling can help to better use your time and keep your company growing.
By Lauri Paxton 19 Jan, 2017
Are you one of the 55 million people in the United States that freelance for a living or freelance as a side job? According to the Monthly Labor Review, the freelance surge is the Industrial Revolution of our time. Some common freelance jobs include technical jobs, professional services, graphic design and professional writing. If you are one of those people who work for themselves, do you consider yourself a business owner or do you consider your side job a hobby?
More Posts
Share by: