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Keep cash flow to an optimum

Guest post by: Russell Bowyer

Article Overview: Keep cash flow to an optimum by observing the following suggested methods: - Keep your payroll bill down to an absolute minimum - however, always pay good money to good employees or they will walk! - Try to avoid signing long-term rental agreements and if fancy offices are not necessary don't bother with upmarket office space, especially if your customers rarely visit your business. - Don't overpay yourself - you only need to take out what is enough to feed yourself. - Keep a close eye on staff travel and entertainment and avoid issuing staff with company credit cards and mobile phones! - Fancy office furniture hurts the bank balance and is not necessary unless you are in the type of business that needs to impress clients. Secondhand or liquidation stock furniture is the best option and will save you a small fortune!

Keep cash flow to an optimum

Keep cash flow to an optimum by observing the following suggested methods: - Keep your payroll bill down to an absolute minimum - however, always pay good money to good employees or they will walk!

- Try to avoid signing long-term rental agreements and if fancy offices are not necessary don't bother with upmarket office space, especially if your customers rarely visit your business.

- Don't overpay yourself - you only need to take out what is enough to feed yourself.

- Keep a close eye on staff travel and entertainment and avoid issuing staff with company credit cards and mobile phones!

- Fancy office furniture hurts the bank balance and is not necessary unless you are in the type of business that needs to impress clients. Secondhand or liquidation stock furniture is the best option and will save you a small fortune!

- Keep an eye on your supplier costs and where possible play one against the other to keep them keen and your profits high.

- Always call your customers that owe you money and make sure you keep a close eye on "Debtor Days" (Debtors days is the time your customers take to pay you from the invoice date)

- Pay your suppliers on time, but if you are going to be late paying call the supplier concerned and always, always stick to any date agreed between you.

- Don't waste electricity by leaving computers and printers on over night - this is also good for the environment too.

- If you are out for a business meal, if the other side offers to pay, never pay!

- Get your invoices out on time and on a regular basis - the sooner you invoice the sooner you get the money!

- Create good systems in your business that will help to save time and will help you to keep employees to a minimum.

- Delegate jobs to the lowest possible denominator in the business - having good systems will help with this process.

For help with preparing a cash flow forecast click the link to our website for"cash flow forecasting made easy"

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Article Tags: absolute minimum, bank balance, cash flow, cash flow forecasts, cashflow software, credit cards, fancy office, fancy offices, liquidation stock, mobile phones, money, office furniture, office space, payroll, rental agreements, small fortune, staff travel



Related Forum Posts
Tax returns! - Well, this is new on me. i had no idea you could sell a site off. If it's anything like purchasing a non-internet business then you need to check into multiple things. Will you need to finance to purchase? If so, you'll need to calculate the cash flow. Also, find out if there will be any add backs to the cash flow, for example, are there other workers invovled to keep the site running...perhaps workers you won't need when you take the site over? Their salaries can be added back to the cash flow if you will not need them. You must see the top page of the last year tax return (never go off just the P & L's). Did the seller run anything personal thru the tax returns that you wont? That's also considered an add back to the cash flow. What is the gross sales for the 12 months? What is the net income for the 12 months? Make sure the purchase price is justified. You can calculate a ball park range on this by doing 30 - 50% of the gross sales for the year or 3- 5 times the net earnings. What is the web traffic like? Is it steady? Do you have time to run the site or will you need to hire someone to manage it? Make sure the business is supporting itself and is profitable. Does the seller have an initial business plan from when they bagan the business, so you can look it over?
Re: Interrealtionship between financial statements - Yes, it’s necessary to take a complete toll of account transactions. If you don’t, then how would you be able to track your financial figures? For example, If a person sold goods for USD 5,000.00, half in cash and half in credit, then with taken impact of all three i.e. cash flow by USD 2,500.00 balance sheet through both cash and receivable and income/P&L statement by USD 5,0000.00, the transaction will not be complete.
Improve your Cash Flow - As we all know, the primary concern of proprietors and managers are cash flows. I would like to share some tips on how to improve the cash flow of your business. 1. Speeding up Collections - collecting receivables earlier, on or before due dates. Discounts for early payments can be one way to do this. 2. Slowing Down Payments - stretch your payables and pay only when it is due. But be careful not to mess up with your credibility. 3. Invest in Marketable Securities - use the money in Marketable Securities and other short-term investments to earn extra cash.
Topics of Interest - There have been some wonderful resources posted in this section. However, I also strongly advise any entreperneur to pick up a few books on personal financial planning; cash flow is key to any business and the best way to start planning good cash flow for your business is to learn some personal financial planning. I have always enjoyed the following: The Millionaire Next Door- Thomas Stanley and William D. Danko Richest Man in Babylon- George S. Clason Rich Dad, Poor Dad- Robert T. Kiyoski and Sharon L. Lichter There are many many more great resources on this topic. These should be read in conjunction with the other resources posted here. Good luck.
Re: Government Grants; sources and experiences - Thanks for posting the UK link, Carol. It could come in useful, as I am heading into some scary potential cash flow problems soon... ouch! Ros


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