1. Review Invoicing Practices
Small Business invoicing practicing could be causing the cash flow struggles. One of my clients was invoicing by a deposit and final bill. There too much of a lag before final invoicing so SimpliProfit changed their practice to progress invoicing each month which help them collect cash faster and on a regular basis.
2. Review Staffing Levels
When your gross margins erode, it has an impact on your cash flow. My review of the financials indicated the salary expense was too high. The decision was made to downsize the staff. They are now utilizing a more flexible workforce to be able to expand and contract due to the amount of work in-house.
3. Review Accounts Receivable Aging
Every week the Accounts Receivable aging should be reviewed and soft reminders sent out. You would be amazed at how effective this brings in the cash. Also, building a relationship with the Accounts Payable person most often gets you paid quicker.
4. Review Industry Practices
In the construction industry, you incur expenses for material before the work even begins. This kind of business does need to collect a 10% deposit invoice for the job.
5. Review Flexible Payment Options
Annual insurance premiums – you can either pay for the year or by the month. You will pay a small fee if you opt by the month and this help to reduce the cash out. If you pay upfront you will need to amortize the prepaid expenses each month.
6. Review Quoting Process
By reviewing your quoting methods for jobs awarded in your company. One of my clients I worked with was quoting too low, and it affected their cash negatively. I implemented a quoting tool and gave them targets for their gross margins. In three months, the cash flow issues disappeared. They didn’t know what to do with all the cash accumulating in the bank. True statement!
7. Create and Review Cash Flow Forecast
Creating a cash flow forecast is the best tool to keep your cash positive. It keeps your finger on the pulse. Cash is still "KING" in today's businesses. Some of the advice above helped one of my clients go from closing their business to thriving today.
Schedule a Consultation Today!
Interested in learning about improving and solving some of your cash flow struggles. Contact us today for your free business consultation!
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