Help clients create a positive cash flow.A cash-flow gap can make it difficult for a business to meet its financial obligations or make the most of emerging opportunities. To achieve a positive cash flow, a company must have a sound strategy in place. Here are some tips you can offer your clients to boost cash reserves Cash reserves See: Cash investments cash reserves Investment funds that are held in short-term assets such as Treasury bills and certificates of deposit until more permanent investment opportunities are available. , delay outflows and help their businesses grow. * Institute sound credit practices. Check credit information on new and existing customers thoroughly before offering any credit. For new customers obtain at least three trade references. Also, consider using a commercial credit reporting service, such as D&B, to verify a borrower's creditworthiness Creditworthiness The condition in which the risk of default on a debt obligation by that entity is deemed low. Creditworthiness Eligibility of an individual or firm to borrow money. . Never grant credit until you're comfortable with a customer's ability to pay, and request a deposit--which would vary from industry to industry--from a new customer, particularly if an order is large of requires you to purchase parts or supplies before completing the work. This not only helps cash flow, but also can cement the transaction. * Bill promptly. Mall invoices the day you complete the work or the product ships. If a job takes a long time to complete, notify the customer in advance that you intend to bill in stages. * Accelerate accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying . Some customers will pay sooner if you provide an incentive. Consider offering a discount to fast payers. This could attract new customers who look at cash discounts as a form of price reduction. Depositing checks promptly also would help your business's cash flow. Don't feel guilty about asking to be paid on overdue OVERDUE. A bill, note, bond or other contract, for the payment of money at a particular day, when not paid upon the day, is overdue. 2. The indorsement of a note or bill overdue, is equivalent to drawing a new bill payable at sight. 2 Conn. 419; 18 Pick. accounts. Aggressively pursue payment of overdue invoices. If an invoice An itemized statement or written account of goods sent to a purchaser or consignee by a vendor that indicates the quantity and price of each piece of merchandise shipped. A consular invoice is one used in foreign trade. reaches 45 days beyond your agreed-on payment terms, engage the services of a collection agency. * Pay bills on time but not before they are due. When paying bills, take as much time as the creditor An individual to whom an obligation is owed because he or she has given something of value in exchange. One who may legally demand and receive money, either through the fulfillment of a contract or due to injury sustained as a result of another's Negligence allows without incurring late fees or interest charges. An exception to this rule may apply when suppliers offer a discount for early payment. * Monitor inventory levels. A company's profitability depends on the successful and timely sale of its products and services. Maintaining inventory levels at less than what is needed to support demand may result in lost sales and delays for customers. On the other hand, excess inventory places a burden on cash resources. Compare inventory turnover with industry norms, and rely on historical sales data and forecasts to set inventory levels Stock sitting on shelves for long periods of time ties up money that could be used for other cash outflows. Sell off outdated out·dat·ed adj. Out-of-date; old-fashioned. outdated Adjective old-fashioned or obsolete Adj. 1. , slow-moving merchandise. Donate what can't be sold. * Manage suppliers. The easiest way to slow down a business's cash outflow is to negotiate with suppliers for more favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. terms. While most suppliers want payment in 30 days, some may be willing to extend terms for a regular customer with a good payment history. Longer payment terms will benefit you by keeping your money to your business longer. Developing multiple sources of supplies keeps vendors on their toes. Finally, do not buy more than you need or more than you expect to sell, regardless of how favorable the sale or credit terms Credit Terms The conditions under which credit will be extended to a customer. The components of credit terms are: cash discount, credit period, net period. . * Consider leasing equipment instead of buying. In the long run leasing equipment generally costs more than buying, but the cash-flow benefits may justify the increased costs. Expensive equipment purchases can tie up cash that you could use for day-to-day operations. * Communicate and manage cash-flow strategies. Be sure to inform staff members how they can contribute to improving cash flow and monitor their efforts. If cash is tight, consult with your CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. for more specific strategies on improving the company's cash flow. Source: Adapted from "Put Your Business on the Right Track With Cash Flow Strategies," Texas Society of CPAs, Dallas, www.tscpa.org. |
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