“5 Key Areas To Boost Cash Flow In 2 Weeks” 

Small Business Coaching - Finding Cash That Didn’t Exist


One Houston small business owner told me he managed his cash well. I was curious. “How do you do it?” I asked. And he said “I watch my net profits every month”. 

That’s when I learned we were talking “apples” and “oranges”. Managing cash isn’t the same as managing net profit.

For some business owners, that’s a discovery. 

I recommend measuring your cash position. 

One method is using an analytical tool. It calculates liquidity ratios. And it shows the ability of small business to repay debt on time.

A Cash Gap Plan improves liquidity. Look at five key areas.

1) Longer Terms With Sellers

Look at the analytical graphs. They reveal the whole story. 

Longer accounts payable than industry average means business is doing well. Negotiate 45, 60 or 90 days for paying sellers. 

Start higher so you have room to go to the middle. Stop getting into the comfort zone, which prevents negotiating.

Find sellers with whom you spend the most. These sellers would be the best to improve cash flow.

2) Shorter Terms With Customers

Check the list of customers doing the most business with you. Then look at terms they use to pay you. 

Are they lower than industry average? If not, it’s time to negotiate so they pay quicker. 

Rank customers according to volume or sales yearly. Look at their timeliness. Check referrals they give. See how pleasurable it is to serve them.

Test your customers. They’ll understand. Regularly, there’s a cost of doing business.

Keep the A’s and B's and let go the Cs and Ds.

3) Fast Collection Method.

Fast collection method uses a regular set of letters. Many businesses don’t have a formal method for collecting payments. 

Letters could be friendly, formal and then harsh.

Use them judiciously. It will work wonders.

4) Bonus AR staff OR Use Collection Agency

Use a script to collect. Place someone in accounts receivable to be responsible for letters and voice script. 

Give out a bonus to the accounts receivable staff in your firm. It’s based on the days they improve collection.

An alternate to use a professional collection agency.

5) Reduce Inventory (Using Lean Manufacturing)

Use Lean Manufacturing methods.

Check inventory days from analytical tools. Inventory days shows how quickly business cycles the stored raw materials. 

Lowering inventory days will improve cash position. It increases asset velocity, which equals sales divided by net assets.

Taking these steps will bring results. Most times as quick as 2 weeks 

Importantly, it will increase cash in the bank for the small business owner. And that’s not the same as net profit!

Written by Suresh Iyengar, P.E., President, Business Unit Execution LLC––“Explosive Business Coaching Houston Results For Small Business”. Call 281.410.5375 and speak to your Profitability Coach Houston today!

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Discover Quick Cash Not Seen Before: Cash Gap Plan

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