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10 Tips to Help Improve Your Company’s Cash Flow

In our last article, we discussed the importance of cash flow management for small and mid-size businesses. Now, you know why it’s important to monitor and analyze your cash inflows and outflows. We thought you would also like a few quick tips to help improve your company’s cash flow.

Below are ten techniques to optimize cash flow:

1. Anticipate Future Cash Needs

Keeping timely and accurate accounting records for your business allows you to build a forecast based on historical results. This forecast will enable you to be prepared for historically difficult periods or seasonal trends.

2. Improve Your Accounts Receivable

Actively manage your accounts receivable and stay on top of customers that are behind on their payments. You can also encourage customers to pay early. For example, if your payment terms are typically net 30, consider offering a slight discount if they pay in net 10. Offering a variety of payment options will also help by making it as easy as possible for customers to pay you.

3. Manage Your Accounts Payable

Get to know your vendors and try to extend payment terms as long as possible. Most vendors will offer terms of at least net 30. Critical vendors may even offer terms of net 45 or 60.

4. Put Idle Cash to Work

If you have significant balances in non-interest bearing accounts, find a money-market or other interest-bearing account where you can earn .5% or even 1%.

5. Utilize a Sweep Account

Most commercial banks will offer you a sweep account structure, whereby cash is swept nightly to an interest-bearing account. While the interest return might not be significant, this function is handled automatically, and any extra income is better than no additional income.

6. Utilize Cheap and/or Free Financing Options

Depending on the nature of your purchase (i.e., some vehicles, computers, furniture, etc.), you may be able to get free financing for a period of time. Take advantage of this free period, but make sure you pay off the balance in full before large interest rates kick in.

7. Control Access to Bank Accounts

Banks and accounting systems have a number of safeguards that you can utilize to create the proper controls. This will help to eliminate fraud or unauthorized use of your bank accounts.

8. Outsource Certain Business Functions

A full-time employee is not always necessary in each function. You should evaluate your business needs and identify functions that may be more cost-effective to outsource. For example, accounting, IT, human resources, and payroll are roles that can be hired by outside firms who specialized in that area. This approach can not only save you money but improve efficiency as well.

9. Renegotiate Existing Service Contracts

Regularly review service plans and contracts to identify opportunities to optimize them. Improved technologies and increased market competition have driven prices down on many services, such as the internet, phones, cell phones, copiers, software support, and janitorial/building maintenance contracts.

10. Maintain a Weekly Rolling Cash Forecast

At a minimum, use Excel to keep track of all estimated inflows (customer receipts) and outflows (vendor payments and payroll) on at least a weekly basis. This will enable you to plan your staffing needs, commit to vendor payments, and ensure funds will always be available to make payroll and vendor payments.


We Can Help

These tips can get you on your way to analyzing and managing your company’s cash flow and help you more effectively control the inflow and outflow of cash. For additional assistance managing your company’s cash flows, developing detailed financial projections, or identifying capital requirements, contact Signature Analytics today for a free consultation.

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