Cash is the lifeblood of any small business. Here are some tips to help your business
maintain a sufficient cash flow to meet its financial goals and run efficiently:
Toughen up your credit policies. Review the payment terms you offer to customers and
tighten them up if slow payment is a problem area for your business. For instance, how
long are customers given to pay? What action will be taken if a payment is missed? Be
sure your credit terms are communicated effectively to customers before transactions are
• Consider requiring advance payments – at least in part – for new customers. For many
businesses, a routine credit check should be performed before a sales or
service transaction is entered into with a new customer.
• Come up with a budget – and stick to it. Surprisingly, many small businesses do not
engage in the budgeting process. A budget can be extremely effective in helping you
keep track of whether cost- and revenue-related goals are being met. Depending on the
size and complexity of the business, the budget process might be informal or formal,
lengthy or simple. Projected revenues and expenses should be broken down by months. If
you don’t already do so, budget for next year’s revenues and expenses near the
end of each year. Review budgeted to actual results monthly.
• Tighten up billing. If collecting bills has become a problem for your business, you might
want to consider increasing the intervals at which customers are billed–e.g., from three
months to one month, or from one month to two weeks.
• Review your accounts receivable weekly or even daily to make sure slow payers
are not allowed to slide. If you have questions regarding your company’s cash flow and credit/collection policies,
give us a call. We can help.