For any­thing to grow it needs fuel. In busi­ness, that fuel is cash.

The eco­nom­ic cli­mate for most busi­ness­es is pos­i­tive right now, but that doesn’t mean you aren’t hav­ing cash flow chal­lenges. In fact, if you are grow­ing, and espe­cial­ly if you are grow­ing quick­ly, your main con­cern day to day may very well be hav­ing enough cash to pay your bills and stay in busi­ness.

Here are some quick ideas that can cre­ate new fuel, quick­ly, with­out nego­ti­at­ing an increase in line of cred­it with your banker.

  • Con­sid­er your invoic­ing terms.
    • Con­sid­er ask­ing for a deposit against your work. Espe­cial­ly if your work is cus­tom for each client. They may very well be expect­ing it and sur­prised you haven’t asked.
    • Step back and look at your cus­tomer val­ue. Do you pro­vide excep­tion­al val­ue?  Does that give you a rea­son to ask cus­tomers for terms short­er than the indus­try stan­dard?
    • Meet with your largest cus­tomers and get their advice. They val­ue their rela­tion­ship with you and are usu­al­ly hap­py to help.
    • Change terms with new cus­tomers. Don’t want to upset the apple cart? Set up new, short­er terms for new clients.
  • Pay less fre­quent­ly. In most busi­ness­es, you are pay­ing your labor long before you are gen­er­at­ing sales and cash to cov­er that cost. If you are pay­ing week­ly, can you move your pay­roll to bi-week­ly or bi-month­ly.  If your pay­roll is $25,000 a week, that frees up $25K or more imme­di­ate­ly. More in that the pay­roll tax­es are paid after pay day, so you get some float there. You will need to man­age this with your team, get­ting folks per­son­al­ly pre­pared, so you don’t lose great peo­ple along the way.  Can’t move your rank and file off week­ly pay?  Just move your man­age­ment team.
  • Deep dive in inven­to­ry. It is easy to con­vince your­self you need a lot more inven­to­ry than you real­ly do.
    • Start with the sim­ple things, like what is your pur­chas­ing prac­tice? Is your pur­chas­ing offi­cer look­ing just for low price, or are they con­sid­er­ing cash flow impact?
    • Ask for longer terms with your key ven­dors.
    • Fire sale inven­to­ry or find a strate­gic buy­er for items you know are nev­er going to sell. Get­ting some mon­ey in is bet­ter than none and its less to man­age.
    • Incen­tivize your team with an inven­to­ry tar­get.  I had a client that gen­er­at­ed new cash of  $350k in 8 months with this one idea!  It is cer­tain­ly worth a small bonus to pock­et $350k in new cash flow.
  • Review your accounts payable prac­tices.
    • Are you pay­ing by the due date or when the invoice comes in? You may be sur­prised by what you find.
    • Con­sid­er pay­ing invoic­es by cred­it card with cash back. If your ven­dors accept cred­it cards, this gives you an auto­mat­ic 30 days, plus, depend­ing on the billing cycle.  Sweet­en the deal by find­ing a card that pays cash back.

Last­ly, ask your team.  You might be sur­prised at how many good ideas they already have!

At Mack­ey Advi­sors, we are com­mit­ted to cre­at­ing a Pros­per­i­ty Rev­o­lu­tion, one per­son at a time.  If the time is right, we would love to help you.

To your pros­per­i­ty,

Mack­ey