Knowledge Base - Cash Flow

40 Ways to Improve Cash Flow

Cash the Life Blood of a Business.

This asset can be more important than employees, customers, revenues, mission statements or catchy web pages. Without cash a business dies. Here are some tips we have used over the years to improve cash-flow in a business.

  • Have a cash plan for your business. It is hard to improve if you don’t know where you’re at.
  • Collect your receivables. (We will dedicate a future edition to this crucial topic.)
  • Eliminate delays in invoicing – get them in the mail as soon as possible.
  • Request progress payments on large orders.
  • Time your invoices to coincide with your customer’s payment schedule.
  • Grant cash discounts to key accounts. (Only if you know they will, in fact, pay earlier.)
  • Raise selling prices after evaluating volume considerations.
  • Negotiate special payment terms with key vendors.
  • Set up a payment schedule for large payables. (Vendors tend not to complain if they are receiving regular payments that they can count on.)
  • Use extended payment plans for business insurance premiums.
  • Take advantage of installment option on Real Estate and Personal Property taxes.
  • Determine if you qualify for budget basis payments for utilities.
  • Negotiate billing dates that coincide with publication dates in large ad campaigns.
  • Have retainers and payment terms with sub-contractors that correspond with the terms you have with your customer.
  • Use internet to obtain competitive prices and renegotiate with current suppliers.
  • Use automated payment systems to time disbursement with exact due date.
  • Adopt a “just in time” inventory system for key items, if you can trust your supplier to meet your schedules.
  • Pay for large service contracts over life of contract.
  • Defer fixed asset additions.
  • Consider leasing vs. buying to eliminate the down payment.
  • Set up a lock box system at your bank for cash receipts.
  • In a seasonal business, negotiate “skip payments” on bank notes. (10 payments per year instead of 12.)
  • Make use of automatic sweep accounts to minimize borrowings or maximize invested cash.
  • Negotiate with your bank for a special purpose loan that is tied to the terms of large contracts with unique payment terms.
  • Tie a short-term loan to a future cash inflow like a tax refund.
  • Consider factoring accounts receivable.
  • Avoid cash travel advances for employees. Reimburse on actual expenditures instead. If an employee doesn’t have a credit card and they travel often, offer to reimburse the annual fee. Don’t use company credit cards.
  • Base executive and sales compensation primarily or gross profit.
  • Pay sales commissions only after collection from the customer.
  • Schedule annual bonus and profit sharing payments during seasonal periods of high cash in-flows.
  • Change payrolls from weekly to by-weekly or monthly.
  • Delay payroll by five to seven days after end of pay period.
  • Evaluate cash impact of owning company cars vs. reimbursing employees for business use of their cars.
  • Liquidate obsolete or unusable inventory.
  • Sell non-productive assets.
  • Rent excess plant space on a short term basis.
  • Determine if your scrap is salable.
  • Consider sale and leaseback arrangements. (If you have equity in selected assets.)
  • Institute a company wide inventory reduction program. (From raw material to shipping supplies.)
  • Determine if you qualify to receive inventory on consignment. Pay only when you use it.
  • File income taxes on a cash basis if you meet the requirements