Improve Cash Flow: 8 ways to Getting Receivables Sooner

Our customers come to us when they are in a cash flow crunch.  Many of them are running very successful businesses, only the timing of their payables and Receivables is simply a bit out of sync. 

Here are 8 things you can do to shorten the time between when your customer wants something, and when you get paid.

1)  Accept Credit Cards and/or PayPal (for internet businesses) – When you accept credit cards, you also qualify yourself (after a few months) for great cash flow rescue option like a business cash advance.

2)  Encourage your customers to e-mail or fax orders –  Mail takes more time.  The sooner you receive the order, the sooner you can send out an invoice and get paid.

3)  Send out a clear, organized invoice immediately – Use software, or make your own template, just make sure that you have invoices ready, so that the moment you get an order, you can send out an invoice.  Make sure that the due date and the trade discount/late fee are displayed prominently.

4)  Offer a trade discount – This is a discount (even just 1 or 2%) that you give your customers if they pay you within a certain amount of time.  Often this small incentive will encourage your customers to pay immediately. 

5)  Due Diligence – When taking on a major customer, call their other vendors to find out their payment history/patterns.  You may even want to run a business credit check.

6)  Deposit without delay – Make an arrangement with your bank to have funds available from deposited checks within 0-2 business days.  If you receive checks from customers nationwide, you could research the possible added value of a ‘drop box.’ Discuss this with your bank.

7)  If possible, request payment (in part or full) up front, prior to filling the order.  This also cuts down on time and money spent on collections.

8)  Check back here later in the week to read my post on small business collections.

Working Capital – Four Things to Plan!

Working Capital = Current Assets–Current Liabilities

Just like the human body needs calories to survive, a business needs working capital to continue operations.  Working capital is the money that is on hand for normal business operations.

If you have a solid business plan, and business is going well, then you should generally have enough income on hand to cover all your operating expenses.  When ends don’t meet, your business has to look for other sources of cash (that’s when you come to us!).  Ideally, however, your business will provide enough income so that there is working capital and enough left over for PROFITS.  That’s a great word, isn’t it?

Here are three things to remember when looking at your working capital and cash flow.

  1. Project revenues honestly and realistically.
  2. Don’t forget to include EVERYTHING in your estimate of costs.  Labor, supplies, rent, utilities, storage, salaries, and professional services/consultants are just SOME of what you need to remember.
  3. Break down and make a time estimate for your business cycles. Working capital means that it is there when you need it, make sure you will have money to cover expenses during the slow periods of your business.  Your cash flow needs to make sense.
  4. Make a list of plausible future changes that could affect your business.  This could include anything from competition to a change overhead, or payment terms on either the Receivables or Payable sides.

The Credit Crunch – What Options are Left?

Small businesses across the country are trying to survive the current credit crunch.  The recent changes in the credit market have resulted in much more restricted access to capital.  As any small business owner knows, access to capital is crucial to growing and surviving in business.

Capital was easy to come by for many small business owners, until the recent mortage crash.  When confronted with less-than perfect-credit, which made conventional loans impossible, many small business owners could tap into the equity in their homes .  Thiswas only an option because real estate values were constantly on the rise.

Now that the bubble has burst, property owners in the hard hit areas are finding it difficult to prove the increased value of their homes.  Small business operators with less than impeccable credit are asking themselves where they will find the cash they need to finance their business/business growth.

Many of these small business owners are discovering the benefits of unsecured cash advances for businesses.  Unsecured cash advances are based on on future credit card sales; because of this, they can be provided with NO credit checks.  Fast Up Front (that’s us) can provide these advances in sums up to $250,000.  Other agencies offer the same size, or smaller, advances.  The ease and speed (less than a week!) of the advance make it a top choice for many small business owners.

 For more information on the services we offer to small business, even those with no credit or bad credit, please visit Fast Up Front‘s homepage.

Bartering Organizations – Questions to Ask Before Joining

See previous article about bartering for background.

There are about 500 bartering organizations in North America.  How do you know which ones to join?  There is no universal RIGHT answer here, you just need to ask the questions, and see if the answers meet your bartering needs.

First off, membership fees are generally low monthly (occasionally annual) fees.  It generally pays off to be a member of more than one organization, as it increases the likelihood of finding someone who can provide the service/good you need.   

1) Is it regional, national or international?

Some exchanges are limited to cities in a specific city/county – others nationwide.

2) How many members does it have?

You want to make sure that there is enough to go around.  Not all businesses in an exchange will want to barter at any given time.

3) Which industries are the other members in?

You want to make sure that the industries represented are ones that you might require goods or services in, and ones that might need whatever you can provide.  Otherwise, you won’t be doing much bartering.

4)  What is the typical transaction size?

Different exchanges work on different scales, you want to find one that is in line with whatever you have in mind.

5) Are there barter consultants?

Some barter organizations offer barter consultants, who help broker the deal in an individualized fashion.  Others are more automated.

To find a bartering organization that works for you, contact the National Association of Trade Exchanges (NATE) or the International Reciprocal Trade Association.

Top Rated Books – Restaurant Management

Since so many of our clients are in the food service industry, I decided to research books that customers from rated 5 stars for Restaurant Management.  These are the books they recommended:

1. The Restaurant Managers Handbook: How to Set Up, Operate, and Manage a Financially Successful Food Service Operation by Douglas Robert Brown (Hardcover – Sep 3, 2002)

2. Running a Restaurant for Dummies by Michael Garvey, Heather Dismore, and Andrew Dismore (Paperback – Jul 9, 2004)

3. Restaurant Management: Customers, Operations, and Employees (3rd Edition) by Robert Christie Mill (Paperback – Jul 14, 2006)

4. Opening a Restaurant or Other Food Business Starter Kit: How to Prepare a Restaurant Business Plan and Feasibility Study by Sharon Fullen (Paperback – Dec 30, 2004)

5. The Encyclopedia of Restaurant Forms: A Complete Kit of Ready-to-use Checklists, Worksheets, And Training AIDS for a Successful Food Service Operation by Douglas Robert Brown (Hardcover – April 2004)

6. The Restaurant Dream? by Lee Simon (Paperback – May 16, 2006)

7. Restaurant Planning Guide by Peter Rainsford and David H. Bangs (Paperback – April 1, 1996)

8. 10 Steps to Successful Bar & Restaurant Management by Dr. Kirk Wakefield (Paperback – Dec 15, 1999)

9. Restaurant Financial Basics by Raymond S. Schmidgall, David K. Hayes, and Jack D. Ninemeier (Paperback – Oct 2, 2002)

10. The New Restaurant Entrepreneur: An Inside Look at Restaurant Deal-Making and Other Tales from the Culinary Trenches by Kep Sweeney (Paperback – Jun 1, 2004) – ok, so this one had a customer rating of 4.5 stars, but I couldn’t find any more 5 stars

Bartering – Relieve Cash Flow Strain & Get Referrals

Bartering removes the money element; thereby relieving strain on your cash flow.  You are a restaurant in need of advertising?  Great!  You provide catering at a big morning meeting and, voila, you get barter credit which you can use to get those flyers – and maybe also a paint job. 

 A key side-effect (and the reason some businesses engage in barter in the first place) relates to the referral opportunity.  Many businesses which barter regularly find that 10% or more of their new customers will come from referrals from other companies they bartered with.

In traditional barter, you would need to find someone who has what you need, and needs what you have.  Thankfully, in today’s world, there are a number of organizations which make bartering much more efficient.  See below for details.

Barter is done on a dollar credit – to dollar credit basis, and is taxable as though it was a money transaction.  However, it saves you from having to dig up the cash when you need.

As already mentioned, barter can be, and is, done in a wide range of industries.  Examples include:  Legal services, Food Services, Healthcare, Insurance, Cleaning Services, Marketing, Auto Repair, etc.

There are about 500 bartering exchange organizations in North America.  To find one near you, contact the National Association of Trade Exchanges (NATE) or the International Reciprocal Trade Association.

Top Rated Books – Small Business Taxes

Okay, I sat down to do the previously promised top 10 customer rated books on small business taxes, and I see that there are really only about 6 from the last 3 years that have 5 stars, so here they are:

1. JK Lasser’s Small Business Taxes 2007: Your Complete Guide to a Better Bottom Line (J K Lasser’s New Rules for Small Business Taxes) by Barbara Weltman (Paperback – Nov 28, 2006)

2. Small Business Taxes Made Easy: How to Increase Your Deductions, Reduce What You Owe, and Boost Your Profits by Eva Rosenberg (Paperback – Dec 30, 2004)

3. J.K. Lasser’s 1001 Deductions and Tax Breaks 2007: Your Complete Guide to Everything Deductible (J.K. Lasser) by Barbara Weltman (Paperback – Nov 3, 2006)

4. Tax Savvy for Small Business: Year-round Tax Strategies to Save You Money by Frederick W. Daily and Diana Fitzpatrick (Paperback – Nov 30, 2006)

5. Deduct It! Lower Your Small Business Taxes by Stephen Fishman (Paperback – Nov 30, 2006)

6. Tax Savvy for Small Business by Frederick W. Daily (Paperback – Nov 15, 2007) – this one isn’t released yet, but previous editions have top ratings.

Four Keys to Avoiding a Cash Flow Crunch

1)  Bill Your Customers
Your clients won’t pay you unless you ask them to.  Many small businesses only send out invoices when they find themselves short on cash.  If you are taking on a regular client, negotiate a regular invoice schedule.  Scheduled and prompt billing is the first step to improving your business’ cash flow; make sure that your system works.  It puts forth the image of an organized operation, with its act together.

2)  Trade Discounts Bring in the Dough
A trade discount is a percent discount given on condition to receipt of payment by a certain date (e.g. within 5 or 10 days).  Even though trade discounts can be very small discounts of just 1 or 2%, they are very effective in encouraging clients to pay early.  When a client pays you before his bill is due, he is effectively giving you a cash advance.

3)  No Deadbeat Customers
Due Diligence is key to running a solid business, especially if it is a business in which a few clients or customers make up the major bulk of your revenues.  If you are taking on a significant new client, check out credit references and discuss their payment history with their other vendors.  Depending on the size of the account, you might want to run a credit check.

4)  Inventory Diet
Your inventory represents money that is not garnering any interest or savings for you.  Its primary purpose is to enable to produce customers what they want in a timely fashion.  Re-examine your inventory and decide what wines/parts/designs/models can be done without. 

For help during those times when you are in a cash flow crunch, check out our website, and find out how you can get a Business Cash Advance.