Effective Cash Flow Management

A common problem affecting all small to moderate size businesses is cash flow. If you are expanding or doing less business, it will be a major factor.

It is not uncommon for us to examine the operating statement of a successful company and find that despite the fact that they made money in the preceding year, they still don’t have sufficient capital to pay their bills on time, pay adequate compensation to the owner/shareholder or to expand their business.

Here are 13 simple, effective methods to correct this:

  1. Don’t employ checkbook management. Do not make purchases based on the amount of money in the checking account. Use your balance sheet or a cash flow statement to determine cash availability.
  2. Spend less money than you take in (good economics). If you have a monthly, quarterly or annual budget based on anticipated business and anticipated net profit, spending less than what you earn enables you accumulate cash.
  3. Decrease your “turn time”. This is the amount of time it takes you to complete and collect a contract once it has been approved. Example: if it takes 6 weeks to complete – – *48 wks ÷ 6 = 8 turns per year. A simple way to remember this rate is the more times you can turn your money in a given year reduces the amount of cash necessary to operate your business. *(52 weeks – lost days and holidays)
  4. Pay your bills on time (and attempt to get a discount for prompt payments). A 2% discount for prompt payment on the 10th of each month will earn you 37% when compounded annually. You could actually borrow money at 6 to 8% to pay your bills on time and that loan would earn you big dollars in return.
  5. Take advantage of the “cut-off date” for purchasing. If you purchase from a vendor/supplier who offers 30 days (terms) and sends a statement in the beginning of a new month for all shipments made through the 27th day of the preceding month, place large orders after the 27th and/or in the first week of the new month. Use a credit card and extend the payment due date by another 30 days.
  6. Convert from weekly to biweekly payroll. This will increase your cash on hand by the value of one week’s payroll and reduce bookkeeping entries from 52 to 26 times. Most modern companies no longer pay weekly (you will need a plan to introduce this to your employees since they are used to being paid weekly).
  7. Reduce your accounts receivables. Collect all balances on the day the work is substantially completed and collect for all change orders or extras when they are executed.
  8. Discount (customers) for prompt payment. On cash contracts create a phrase such as: “The balance of ______ is due on the day the specified work is substantially completed. If paid on the date of invoice, which shall be considered the day of completion, the customer shall be entitled to a discount of _______. Balances paid after that date are subject to interest at the rate of _____%.
  9. Require deposits on all sales; they contribute to cash flow. For corporations, they are (mostly) treated as liabilities and represent no tax consequences until a contract is completed (Deposits on sales made to homeowners are regulated in some states).
  10. Allow progressive payments, particularly on large cash jobs. Payments upon delivery or partial completion speed up the collection process and enhance cash flow.
  11. Postpone spending wherever possible, but not if the postponement would cause an increase later. Example: equipment maintenance.
  12. Do away with operations that aren’t profitable or only marginally productive. Could be a product or outmoded procedure. Every company has a few “sleepers” and “sacred cows”. Get rid of them.
  13. Set measurable goals and monitor them. The worst mistake you can make is to enforce across-the-board percentage cut in costs. It’s unfair, impractical, and, in the long run, ineffective.

These changes are neither complicated nor simple. They require thought and then discipline, but they represent the keys to increasing cash flow.

We’ve used the consulting services of Dave Yoho Associates for several years now. Much of our success can be attributed to following their systematic teachings and practices.

Michael Hoy, President
Great Day Improvements

Dave Yoho Associates provided guidance, advice, best practices, and support to our entire staff. Our company has improved across every level after working with them.

Cris Keeter, Owner
All-States Exteriors

We are grateful to have Dave Yoho Associates work with our entire team. I firmly believe the improved performance of our event marketing team is directly tied to your coaching over the last couple of years.

Scott Barr, Steward
Southwest Exteriors

We found Dave Yoho Associates extremely professional and knowledgeable in evaluating our current business model and recommending specific solutions that will improve our efficiency and profit.

Wasyl Bodnar, President
Ventana Design, Sales, and Manufacturing

I want to thank the entire team at Dave Yoho Associates for meeting with our Canvassing Managers last week. The knowledge we learned in only one day was invaluable.

Jason Hollister, Proximity Marketing Manager
RbA Southard Corporation

One of the primary takeaways from your most recent visit to our company was that the words, promises, and tone of our call center reps need to speak directly to the prospect’s needs, followed by a professional, systematic sales presentation which builds immediate rapport and trust.

Dave Cerrone, President
Fitch Construction

It was an honor for us to have Dave Yoho Associates hold a sales meeting for our team. Everyone was enthralled by the powerful content that we are already implementing throughout our business.

Rick Otto, VP of Sales
Coach House Garages

Recently, Dave Yoho Associates performed ‘role-play’ scenarios for three hours with our salespeople. The eye-rolling is gone and their confidence has grown substantially. Can’t wait for your visit next month!

Jason Phillips, CEO
Phillips Home Improvements

Your consultant introduced many thought-provoking, exciting concepts that were implemented and drove our net profit. We look forward to a long and prosperous relationship with Dave Yoho Associates!

Mark Watson, Owner
Exterior Medics

Our remodeling business had annual sales of under $9 million when we became contract clients of Dave Yoho Associates. Due to their training and systems, our revenue soared – – we are headed for over $35 million this year.

Vince Nardo, President
Reborn Cabinets


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