Manage Cash Flow & Watch Your Business Grow

One of the most difficult challenges facing business owners today is managing their cash flow.  Making sure that you receive the money owed to you and paying your vendors in a timely manner can be a challenge.  At Wallkill Valley Federal Savings & Loan, we understand and hope the information that follows will give you some ideas on how to help take charge of your cash flow and grow your business.

The person who plans, wins
As with any other area of your business, the more planning you do, the more aware you will be of possible shortfalls in your cash flow.  Projecting the flow of cash on a yearly or at least quarterly basis can go a long way to helping you grow your business.

  • Start with the cash you have on hand and plan from there. 
  • Review receivables – What receivables will be coming in and when do you think they will be received?  The more detailed you can be the better.  Use past history to predict future behavior when it comes to your receivables.  If you have a client that consistently pays their invoices on the due date or a few days late, then you know how to better plan when the cash will actually be in your hand.
  • Detail payables – Know the amounts owed to your venders, what the terms are, what the actual due date is and then lay it all out.

So you’ve armed yourself with this information, now what?  There are tons of resources out there to help you predict and manage your cash flow.  The Small Business Association and SCORE have some great resources to help.  Check out this awesome template gallery on SCORE’s website.

Manage your receivables
How do you get your customers to pay you the money they owe you in a timely manner?  That, my friends, is the million dollar question. We would like to offer several tips for helping you solve the question that has plagued many a business owner:

  • Take deposits.  Instead of billing your client, doing the work, and then waiting to get paid, request an up-front deposit at the time you engage their business.
  • Offer discounts to people who pay on time.  Even 2% is sometimes enough incentive for customers to pay upfront.
  • Invoice as soon as possible. 
  • Make paying as easy as possible.  Offer Credit Card Payments and some type of online payment method.
  • Track your accounts receivable and follow up as soon as a payment due date is missed. 
  • If there is a delinquency, call frequently to follow up.
  • If you have a customer that has a tendency to pay slowly, require Cash On Delivery (COD) of your product or service.

Take a look at your payables
It is important to keep your employees and vendors happy and paid on time.  However, the reality is that sometimes the cash isn’t flowing like you thought it would and you run into a sticky situation.  Here are some tips on payables and making sure you keep those who keep your business running smoothly happy.

  • Use terms to your advantage.  If you have been offered 30 day terms, then don’t pay the bill on the 15th day. 
  • Use Electronic Funds Transfers and other types of online payment services and pay on the day it is due.
  • Communicate!  If you can see a cash flow issue in your near future, call your vendor and let them know.  Most businesses will be more understanding if you give them a heads up that the invoice will be paid a few days late.

When the flow isn’t happening as you planned
What do you do when the check that was in the mail doesn’t come and you have a stack of bills that are due by the end of the week? Well solving this kind of problem at the last minute can be a challenge but here are some thoughts:

  • You can call your vendors and try to buy yourself some time. 
  • Call your customers who you have longstanding relationships with and ask them to pay their invoice early.
  • If neither of those options work, be sure to pay your employees first.  You need to keep your workforce happy so that when the issue is cleared up, you still have a staff.

Create a safety net
As we talked about above, the ideal scenario is to plan out your cash flow so that you can see periods where you might run into issues and have a contingency to work around them.  If you have done this, you have a few more options to help you get through the rough patches.

  • First, if you see a dip in your projection, offer incentives to customers during that time frame to try to increase the revenue you have coming in.
  • Next, start setting aside excess cash when you can to create your own slush fund. 
  • Finally, talk to a bank (like us) about establishing a Line of Credit.  We at WVFSL love to see a business that has the foresight to look at their financial future and plan.  A Line of Credit is an easy way to have the cash you need when you need it.  You have a pre-approved amount available for use and you only pay interest on the amounts you use.  The trick is to pay back the funds you use right away!

At Wallkill Valley Federal Savings and Loan, we want to be not only your bank, but your source of banking information. If you want help getting a safety net in place in the form of a Line of Credit, give us a call at (845)895-2051.  We would be happy to speak with you.