“Money makes the world go around
…the world go around
…the world go around.
Money makes the world go around
It makes the world go ’round.
A mark, a yen, a buck or a pound
…a buck or a pound
…a buck or a pound.
Is all that makes the world go around
That clinking, clanking sound…
Can make the world go ’round”……..”Money…Money” from Cabaret, lyrics by Fred Ebb
Money moves into and out of North American businesses in a constant ebb and flow, but knowing exactly how to make more of it flow in and stay put is sometimes a mystery. Everyone wants to unravel that mystery and know how to keep cash flowing into their own pocket, be that a personal pocket or a business one. Let’s look at a few basics on how to improve cash flow.
Decrease Expenses. Probably the most obvious way to increase cash flow is to cut major expenses. In some companies this may mean more conference calls and fewer face to face business meetings to cut down on travel. Or it may mean deferring the purchase of new manufacturing equipment or computers for the accounting staff until replacement is absolutely critical. And cutting down on non-essential expenses can be done just about everywhere. There’s not a personal budget guru alive that doesn’t say “Eliminate your daily caffeine fix at your favorite Starbucks and you too can eventually afford <insert your expensive want here.>” Businesses have non-essential expenses that can be reduced or eliminated too. Identify your company’s ‘Starbucks fix’ and see how you can cut back gradually.
Manage Receivables. This one too seems obvious….all ya’ gotta do is get folks to pay you faster. Yeah, right, like that’s easy to do in today’s economy when 90 days is the new 60 for outstanding payables. Perhaps the answer is to not extend the credit to begin with. And by that I don’t mean losing the sale, I mean, what about offering a credit card as a payment method to your customer? The customer gets the benefit of a 35-30 day grace period before they need to pay Visa/MasterCard, but you get your cash within 24-48 hours. And you get the added benefit of re-purposing your collections clerk to a role that drives more revenue to your bottom line.
What are the top business practices that you have put into place to help increase your company’s cash flow?