6. Revolving credit line. Establish a revolving line of credit through a lender to help you with potential cash flow crunches - especially if the amount of savings from prompt pay discounts is greater than the financing charge from the lender or if the lender's financing charge is less than what your vendors might charge for late payments.
This helps give your business a safety net so that you can continue to operate during those times when you are offered great specials if you buy today but may not have extra cash available.
7. Savings Fund. Establish a savings fund to help you operate through slow times. Most businesses have swings in their business flow, and managing cash effectively can be a challenge. Store away extra during the good times to help alleviate issues during the slow season. I know this sounds easier than it is, but if you take out a percentage each month and transfer it to a savings account then it will be "out of sight and out of mind."
Anything that you can do to focus on better cash flow will provide benefits to your business. The worst thing you can do is sit back and "hope" that things go well. Look around! See those "CLOSED" signs on the surrounding shop windows? They played the "hope" game and lost. What are you going to do? Hope? No...implement a plan for cash flow management starting now.
Pam Newman, president of RPPC Inc., is a Certified Management Accountant, author, and Certified QuickBooks ProAdvisor for financial and point-of-sale software. She is also a speaker at National Pavement Expo, www.nationalpavementexpo.com. Visit her website at www.quickbooksinformation.com or call 816.304.4398.