Optimizing Your Cash Flow With Proper Accounts Receivable Management

January 4, 2008 at 10:28 am · Filed under cash management

Tip! ) Now let’s say you use a new credit card to take a cash advance of $1000, but are unable to pay it immediately. Over the course of a year, your $1000 cash advance at a 29% interest rate could accrue interest of $300 or more.

Businesses miss on growth opportunities and even close their doors every day, not because they aren’t profitable enough, but because they are strangled by poor cash flow. The problem is that while their profit and loss statement shows success, their bank account cries poor. Excessive money tied up in delinquent receivables, bad checks, and bad debt write-offs, rob businesses of valuable cash flow, handcuffing their ability to grow or even stay in business at all.

It doesn’t take long for a business to get caught up in a spiraling trend of increasingly late receivables, only needing a few additional delinquent accounts to start the process. Most companies lack the expertise and manpower needed to handle a spike in delinquent accounts. Soon, their staff is doing more work chasing late receivables, and they end up neglecting the easier to collect, more current accounts. Eventually, a higher and higher percentage of accounts become delinquent and more and more accounts become uncollectible, forcing companies to employ expensive collection agencies to recover at least some of their money at a big loss or they write off the debt completely. The end result is a loss in profitability and a serious strain on cash flow.

Tip! You must have a checking account. This is logical since that is how you will be able to get your quick payday loan cash.

There are some more obvious, common sense practices that companies can employee to maintain a healthy accounts receivable portfolio. A few examples include:

1. Perform a credit history check before extending credit.

2. Set and adhere to credit limits.

3. Establish your credit terms in writing on statements and invoices

4. Require all sales and money management staff to know and follow credit policies.

As for maintaining or restoring a healthy accounts receivable portfolio, companies may need to invest in additional personnel or outside services with expertise in delinquent debt collection. If a company’s receivables are large enough and they have a budget which allows them to add experienced, full-time debt collectors to their staff, they should make the investment in additional personnel. If a company can’t afford it or their delinquent receivables don’t require full-time attention, outsourcing would be a better alternative.

Tip! Revolving Credit Line. Establish a revolving line of credit through a lender to help you with potential cash flow crunches.

National Revenue Corporation is a collections agency that specializes in “preventative maintenance” collections strategies. They offer variety of low, fixed fee solutions that make it attractive for businesses to employ their services to perform collections on delinquent accounts right as they become delinquent. They provide the necessary expertise to collect on the harder, delinquent accounts, while their client’s staff focuses its efforts on the more current, easier to collect accounts. With this approach, both current and delinquent account collections improve yielding improved cash flow and a well-balanced accounts receivable portfolio.

Marc Eskew is widely recognized in the area of accounts receivable management. For more information on preventative maintenance approach to accounts receivable management or to contact Mr. Eskew, please visit http://www.fmxservices.com/cashflow

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Entrepreneurs Know Profits and Cash are Different

December 18, 2007 at 1:46 pm · Filed under cash management

Tip! You will never end up crying with Fast Cash Payday Loans. This is because if the company you have applied will not approve your loan, they will somehow send you list of companies that match your qualifications.

“How come there’s never any cash in the checking account?”

How many times have you asked yourself that question? You know the business is making money. The Profit and Loss statement shows a profit every month. You are constantly signing checks to pay the quarterly tax payments. Every time you go to the bank for a ninety day note, your banker agrees without batting an eye — just passes over the papers for your signatures.

And he tells you, “That business of yours sure cranks out the profits and it just keeps growing. What a gem.”

But where’s the cash?

If your business is growing at a rate of 30% a year, and your gross profit is 25%, you will always be out of cash. It’s amazing, but unless the business generates high profits, even moderate growth will kill a business. The business can survive only as long as it has sufficient credit to borrow money — more money each time it goes to the bank. But when the debt service closes in on the cash flow, any downturn in sales, or slowdown in collections, or increase in costs can stop the availability of credit.

Tip! ) Let’s say you have a balance of $1,000 on your credit card and you take a $1000 cash advance. Two months later, you pay $1000 towards your bill.

How do you increase profits? Raising prices is a good way to start. My barber understands the supply/demand curve as well as anybody I know. He runs a one-man shop and works only by appointments. When he starts to see new faces looking for appointments (more demand), he raises his prices. Certainly some of the old customers leave and try another barber but they soon come back (he’s that good.)

He’s also constantly improving his business by getting rid of problem customers. If you don’t show up and you haven’t called to cancel (causing him to lose the income for a time slot) — he just doesn’t have any time available when you call to make an appointment.

Tip! Revolving Credit Line. Establish a revolving line of credit through a lender to help you with potential cash flow crunches.

It’s easy to raise prices and increase profits when you provide a quality product.

You might create higher priced product presentations based on the same product or service. The fast food people learned this long ago. “Would you like me to super size that?”

Do you really think a Cadillac costs twice as much as a Chevy?

You could bundle companion features into a single product. “Would you like the extended warranty with this purchase?” Or, “So long as we’re here checking the AC unit, would you like us to clean the air ducts?”

Another issue that drains the cash is principal payments on loans outstanding.

This one caught me when I first started in business. The P & L doesn’t track cash or the principal payments made on the loans. The only way you can see these is to look at the balance sheet and note the loans payable balance decreasing each month.

Most entrepreneurs now make good use of the flexibility in terms available from lenders as they compete for good borrowers. I always made it a practice to negotiate an interest rate, an amortization schedule, a due date, and a pay rate. When I had these in my loan documents I knew I was in control of my cash flow.

Tip! Maintain a list of emergency money generators. These are items that you can use that require little or no planning, either because you have it done or it just doesn’t need it, that deliver short-term cash.

My partner for many years used to say that “profit” was a term created by the IRS so they would have something to tax us on.

Maybe so, but when you are starting out, don’t let the accounting entry under “Profits” fool you into thinking you are successful — check the cash.

Art Consoli held eight corporate positions with Johnson & Johnson before starting his first business. He went on to build over twenty businesses from patents or ideas or from businesses others couldn’t make successful. These ranged from starting a veterinarian drug company to taking over a steel fabricating company to developing the first manufactured home subdivision to qualify for every private and government assisted mortgage program in Arizona. He also did ten workouts for lenders and owners; the last was a $30 million, 300 employee, precision parts manufacturing plant that made parts for the auto industry. Consoli’s unique background and skills allow him to speak and write about how someone with limited experience can do a self-evaluation which will let him decide which business opportunity is best, how to evaluate opportunities and gain control over the one which offers the greatest potential and then manage that business to success. Readers of his book call and write to tell him how much his book has helped their lives and improved their business.

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Cash Management, A Challenge For Every Household

December 12, 2007 at 9:40 am · Filed under cash management

Have you ever wondered how comes that certaing families never manage to get out of debt? Even if you paid them all debt today, in a matter of 1-2 months they will be in the same debt again. Once there, they manage to keep a floating line, but it seems like that is their personal level of buoyancy: they can’t float closer to the surface, nor they go deeper.

Well, such people lack conscious cash management. While they do it inconsciously (proved by the fact that they keep the debt level constant), they are not able to manage it by thinking their financial steps every month.

Ideas for those who want to try a change:

• For two-three months (while you are in your usual debt), write down all your expenses, and group them on big categories, such as food, drink, housecleaning, house bills, children stuff, clothes, leisure. It is not going to be easy, but you have to push yourself to do it, otherwise you’ll never get conscious about your cash management.
• Look at those categories, see which costs you the most, then try to reduce a little bit from all of them (don’t cut all the leisure stuff, because you’ll get frustrated, and once you’ll have more money than usual, you’ll be eager to spend more), enough as to create a small fund which will become bigger and bigger with every month that passes.
• Next month, when you get your salaries, split everything from the very beginning, in the above mentioned categories, according to the expenses you’ve had in the past. It is helpful if you can get some boxes or other recipients, or even wallets, label them and fill them up with the respective amounts.
• If this does not apply for you, as you get the money in the bank account, still do it, but instead of filling the boxes with money, put inside some pieces of paper on which you write the respective amounts you’ll be able to spend for the next month.
• Every time you make a purchase, depeding on the case, you take money from the correspondent box, or you deduct the amount from the initial one, and write down the result.
• Even if you earn more in one month, allocate the usual amounts for the various categories and put the rest into the savings account. You’ll be one step closer to paying your debt.

I promise you that after a couple of months you’ll see the benefits. Sometimes you’ll be so lazy, that you’ll refrain from shopping because the thought of having to write down all those purchases will terrify you.

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Cash Flow 101

October 20, 2007 at 12:23 pm · Filed under cash management

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Cash Flow Planning for Solo Entrepreneurs

October 6, 2007 at 12:24 pm · Filed under cash management

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