Tips 167-170: Help Your Cash Flow
Grow Your Business, Not Your Inbox
Reduce the Strain on Your Cash Flow by Requiring Customer Deposits to Cover Upfront CostsOffer incentives for your customers to pay early. Collect progress payments on large jobs. If you're using subcontractors, have the customer pay them directly--it may cost you a bit of profit, but if cash is tight, it's worth it.
Develop and Use an Effective Financial Reporting SystemLook for one that tracks income and expenses, gross profit margins (by product or service), operating expenses, cash flow, current ratio, quick ratio, accounts receivable agings, account payable agings, inventory agings, debt-to-worth ratio and trend data (e.g., comparisons to last month, last year, etc.). Make sure the information is timely. It won't do you any good to know that your cash flow was more of a cash trickle three months after the fact.
Take Advantage of Trade DiscountsIf you can borrow at less than 37 percent in order to take a 2 percent discount and pay 20 days early, you'll save money. I know that doesn't seem possible, but the fact is you're earning 2 percent for a 20-day investment (paying 10 days instead of 30). Annualized, that really adds up. Here's the math if you care to check it out for yourself.