Issue 276 - Making Cash Flow Faster

In talking to my customers which I do at least once a day (or more) they are having a harder time collecting money. The cash flow issues have become more of a problem because everyone is holding each other up. I recently came across a few techniques from Les Masonson, author of Cash, Cash, Cash: The Three Principles of Business Survival and Success to increase the speed of your cash flow that I'd like to share with you today. Remember cash is KING !!!

It is a good idea to get a second opinion. So we took a look around at some other experts in the field of business management. Les Masonson's advice touches on several topics we've covered in the past, reinforces some current topics we're discussing, and introduces a few I don't believe we've mentioned before. Take a look below for the points we picked from the article, or click the link to read the whole article. As provided at Power Home Biz.

Fast Collection

In your business, you should collect money as fast as you can. To do so, try these things:

Try to speed up customer orders by having them fax their orders to you.
Send out your invoices the same day goods are shipped, not a week or two later.
Indicate on your invoice when payment is due, and specify the penalty interest for late payment.

Deposit Checks Fast!

This seems only obvious, but it's extremely important. In fact, here are some of Masonson's sure-fire suggestions for getting the fastest availability on deposited checks.

Always deposit checks the same day they are received. Don’t hold checks until the next day because you lose one day's float. Key point: you can lose three days of float by not depositing Friday's checks until Monday.
Obtain availability of 0 to 2 days on deposited checks. Don't let your bank give you the customer availability of 1 to 5 days. Be persistent. Ask the bank for its "availability schedule" and scan it to be sure you're receiving fast availability of two days or less.
Don't deposit checks in a bank's Automated Teller Machine or use the Night Depository since you have no evidence that you actually deposited the checks you said you did. Remember, you only receive a receipt that shows the time and dollar amount on the deposit at the ATM, and you get no receipt at the Night Depositor.
If you still decide to use a bank's ATM for check deposits, find out the bank's availability deadline. Some banks have a 12 noon cut-off time which means that any checks deposited later are considered to be deposited the next day! In that case, you lose an entire day's float, even though you did your bit to get the checks cashed.

Inventory is Not Cash

Every item you have sitting on your shelf should eventually be transformed into cash in your bank account, and the sooner the better. As long as it's inventory, it's basically dead weight. If it is not moving, you're not having cash flow.

Here are recommendations to minimize the cost of your inventory:

Attempt to forecast as accurately as you can the day, week and month what you expect to sell.
If you are dealing in more than one item, determine which item accounts for 80% of your sales. Then minimize ordering other items that are selling poorly or infrequently.
Determine how fast you can get inventory, once you order it. Try to order as late as you can. Some firms can use "just-in-time" inventory which enables them to receive their order the day they need it.
Determine your economic order quantity and don't order too much inventory just to save a few pennies.
Shop around and make sure you are getting competitive prices.
Develop a policy for determining what is obsolete inventory, and how you can get rid of it. The best way to get rid of dead inventory is to sell it whatever you can get for it, even if that's only 10 percent of what you paid for it. At least it will generate cash flow.