In this economy, businesses need to get more efficient and creative about ways to pump up their cash flow. Here are some suggestions to help you get inspired to think of new ways to improve your bottom line. The first ideas were presented in Parts 1 and 2. Now for some more in the final installation of this series:
7. Make your tax estimates more accurate
Ever get a large tax refund and think it’s found money. It is: yours. It was your money to begin with, you just overpaid during the year and gave the government a tax-free loan. To get the most out of your cash flow, work with your accountant to get an accurate picture of taxes your business may owe and don’t just blindly estimate high. While not fool-proof, it is an approach that may give you access to more cash during the year. Depending on your business cycle and the seasonality of your sales, you may be able to use the extra cash to invest in more inventory or equipment needed to increase your efficiency creating extra sales overall.
8. Re-evaluate the timing of expenditures
Are there any cash outlays that you can put off? Suppliers will likely grumble and this could negatively impact your service and operations, but what about other not-so-obvious sources? For example, if your company matches your employees’ retirement contributions, does your plan setup allow you to make your contribution once annually rather than every pay period? Of course, you may need to communicate this properly to avoid morale issues and perhaps offer an extra .5% match. But in this economy, an employer needs to consider all options to translate better cash flow into bottom line earnings to keep those employees on.
For those of you still writing checks, consider paying directly on the vendor’s site electronically. Usually payments are credited to your account the day they are made, even if the vendor doesn’t get paid right away by their processing agent. Not only are electronic payments more secure than “snail-mail” but you can hold onto the cash as long as possible by paying as late as the actual due date. One caveat however, is only pay at the last possible moment when you are organized. Ensuring you understand and know the deadlines is critical as late charges can more than outweigh the benefits of using the cash for a few more days.
9. (Re)negotiate payment terms with your vendors
If your business takes credit cards, how often do you pay the merchant fees? Ask the vendor whether you can make one lump-sum fee payment at the end of the month. This is cleaner and easier to track from an accounting perspective with the added benefit that you get use of the cash all month. Just be sure to set up an estimated liability each day so that you don’t find yourself short when the bill comes due. See your accountant to help you setup a quick and easy way to process the appropriate entries.
These are of course only a few suggestions to what might work for some businesses. Each situation is unique, but hopefully this has inspired you to look at your business from a new angle to make the changes that will work in your environment and add to your bottom-line. Happy hunting and remember to look everywhere for savings.