FINANCING & BUDGETING • November 5, 2014
2 minutes Read
By Gene Marks
Small business influencer Gene Marks is a guest blogger for CAN Capital. He is a celebrated author, columnist and small business owner.
Want to increase your cash flow? It’s not as hard as you think. Many people think first about increasing their sales or cutting their expenses. But ask any accountant (like me) and they’ll tell you something different: the secret to increasing your cash flow is right under your nose. It’s your accounting system. What does that mean? Here are three ways to increase your cash flow with a just a few tweaks to how you do your accounting.
Get invoices out faster. Sure, you’re busy. You’ve got problems. You’re running around. You finished the job. You shipped the product. You’re done with the service. But you’re not invoicing right away, are you? You’re sitting on the paperwork, waiting until the end of the week, holding it all off until your catch-up day. Wrong. Every hour that you’re not invoicing for work done is costing you money. Money that’s still sitting in your customer’s bank account and not yours. You need to change this. Every day, have a process for getting invoices created, printed, approved and sent for every bit of work that was completed. Try to email them because it’s faster. Set up automatic invoicing in your accounting system for those customers that are on a recurring plan. When the invoice is sent, have someone in your office contact the customer just to confirm it made it to the right party and that it was scheduled for payment because, well…you never know, right? That will get the clock rolling and ensure that payment comes to you quicker.
Use alerts. Good accounting systems today have automatic alerts built in that you can use to let you know about things in advance. You can set an alert so that you’re getting an email when an invoice is coming due, when a quote has been outstanding for more than a few weeks or when inventory items are falling below safety levels. You want to operate your business by looking ahead, not reacting to surprises. The more you can jump on these problems before they become problems, the less risk you have of bleeding cash while you’re waiting to collect from that customer, getting that deposit for that new job or holding off work (and delaying your billing) while you’re waiting for inventory to be re-ordered and received. Having an alert system will make a significant improvement to your cash flow.
Read your general ledger. It’s not the most exciting activity, but it’s a cash-rich exercise. Every month, print out your detailed general ledger from your accounting system and review it in detail. You’ll be informed. You’ll be educated. And you’ll find some interesting things. Like, why are you using this particular vendor when you know there’s another one who has cheaper prices? Or why you have multiple invoices being sent to the same company when you know there’s a better way to collect. Or why your payments seem sporadic from that particular customer. Make your notes, ask your questions, and follow up on the things you learn from reviewing your general ledger. Every action you take will be one little adjustment to the process of moving cash faster.
Sure, there are plenty of other things you can do to help increase your cash flow. And they all add up. But these are three things any accountant would do. And who better to look to for guidance than the people that handle cash for a living?
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