5 Ways to Improve Cash Flow

Cash has always been King, but the recent and current cash crunch has served as an abrupt reminder to many business owners.  So how do you reduce your need for cash?

1) Buy inventory and supplies just as you need them, not earlier.  A volume price break sounds good, but takes more cash up front.

2) Use of a credit card to pay regular bills gives you an extra 20 (or so) days before actual cash is required.

3) Taking advantage of discounts for early payment may make financial sense, but hurt cash flow.  Take another look at how and when you decide to pay early to take advantage of discounts.

4) Look at your Accounts Receivable early payment discount policies.  2% Net 20 may make less cash sense than 3% net 5.

5) In a custom products environment, requiring deposits from the customer in advance of purchasing dedicated materials or supplies can help both of you.  Your customers need you to be solvent!

All of these recommendations should be reconsidered whenever the relative near term criticality of cash flow and over all costs changes signficantly.

One thought on “5 Ways to Improve Cash Flow

  1. Great post as always. One more idea would be to work with suppliers to have consignment inventory so you don’t pay for supplies until you use them.

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