Managing Cash Flow Problems

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A diagram of the company cash cycle from first...

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Are you having problems managing your business’s cash flow? Short of borrowing money, which I do not recommend, what can you do to improve your company’s cash position? Here’s some suggestions.

You can regain control of your financial situation by examining several areas of your business. The first area to look at is purchasing. You can conserve cash by buying smaller quantities of supplies more frequently instead of buying them all at once. The best time to buy in bulk is if a significant discount is offered. And when it comes to payment, negotiate with your vendors to get the best possible terms. You should pay early if offered a price break for prompt payment; otherwise, bills should be paid on time.

You can put the same concept to work with your customers by offering a discount for paying invoices early. If a payment is late, though, consider charging an extra percentage on the invoice. Billing customers immediately after your company ships merchandise may help speed up cash receipts. Also, any customers who regularly make late payments should be switched to COD.

Another area to look at is inventory. You should attempt to return slow-moving inventory or mark it down so that it will sell. You can avoid overstocking new purchases by carefully planning the quantities that need to be kept on hand.

A review of operating expenses can help you find ways to cut costs on overhead items, such as insurance and telephone and Internet service. To reduce taxes, consider making any equipment purchases before year-end if your business will be able to write off the cost on the current year’s tax return.

Good cash management is essential to business prosperity. If you would like to learn more about developing or improving your financial management system or discussing how the CommonSense System of financial management can improve your cash management, email me at or call Kirk at 402-658-7340.

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Cash is King!


As Dave Ramsey likes to say, “…cash is king…”. I have to agree. Having a cash reserve (1) provides freedom for both you and your business. Freedom from concern about meeting not only the next payroll, but the payroll you need to make three months down the road. Freedom from stifling creativity and resourcefulness. Freedom from being in bondage to your suppliers and vendors. With an adequate cash reserve, you have a stronger negotiation position. With an adequate cash reserve, you put your business in a greater position to improve your margins and reduce expenses by taking advantage of early payment discounts. An adequate cash reserve also allows you to pursue changes in your business plan necessitated by the marketplace or as called by God.

How much cash should you have in reserve? A good rule of thumb is to retain approximately 50% of your annual expenses for a cash reserve. You can get there by committing to saving a percentage of your profits each month.

If you would like to learn more about increasing your cash flow by improving your invoicing and collections or how a part-time, virtual CFO can help transform your business using the Bible as our guide for a fraction of the cost of a full-time employee, email me at or call Kirk at 402-658-7340.

(1) And let them gather all the food of those good years that are coming, and store up grain under the authority of Pharaoh, and let them keep food in the cities. Then that food shall be as a reserve for the land for the seven years of famine which shall be in the land of Egypt, that the land may not perish during the famine.” Genesis 41:35-36 (NKJV)