When a small business is having problems with cash flow, borrowing money isn’t the only solution. Instead, what is frequently called for is better cash management. Here are some pointers.

Purchasing. Instead of buying supplies all at once, buy similar quantities more frequently. Buy in bulk only if offered a significant price break.

Negotiate the best possible payment terms with vendors. Pay bills on time, but don’t pay early unless offered a discount for prompt payment. Passing up a discount can be costly. Know your vendors terms and work terms that are mutually advantageous.

Getting paid. To help speed up receipts, put the same concept to work by offering customers a discount for paying their invoices early. If that isn’t successful, charge an extra percentage on past-due invoices – and, send bills promptly. I personally know this can be very difficult – especially during busy seasons. Instead of waiting for a 30-day billing cycle, send invoices immediately after the goods and services are delivered. Consider switching perennially slow-paying customers to COD.

Managing inventory. Generate cash flow by getting rid of slow-moving inventory. Return the items where possible and come up with a plan to move the rest, even if it means marking down the items substantially. For new purchases, avoid overstocking by carefully planning the quantities that need to be kept on hand.

Trimming spending. Review operating expenses to make sure they are necessary. Look at ways to cut costs by shopping for better rates on insurance, telecommunications and other overhead items.

Controlling taxes. Take advantage of opportunities to reduce taxes by planning capital acquisitions or setting up tax-deferred retirement plans. Many of these year-end planning opportunities require timing considerations.

Forecasting and budgeting. Using reliable, up-to-date financial information, map out projected cash inflows and outflows. We can help to make standard practices of regularly monitoring Company cash flow’s.

(Richard H. Veihl CPA, is an author and owner of Veihl Consulting Group, PC., a full-service accounting firm providing tax, accounting and business consulting services to small businesses. We welcome the opportunity to discuss your planning and business considerations. )

Veihl Consulting Group, P.C.
Certified Public Accountant
1416 S. Gratiot Avenue
Mount Clemens, Michigan 48043
(586) 468-6611