Marketing Q&A By Al Jabaly

Al Jabaly is a certified marketing and business consultant with over 20 years of small business experience. Email your questions to al@FloridaBA.org. All questions will be answered via e-mail. Some of the most interesting questions will be posted in this weekly column. For further information, Al can be reached at 1-888-899-3190

 “AL. MY CASH FLOW IS ALWAYS DISMAL! WHAT CAN I DO?"

To maximize your cash flow, you have several options.

A) Look at your inventory and receivables
1) Reduce excess inventory to free up cash. Dump the old stuff sitting on shelves.
2) Reduce working inventory. Order as you need. Ensure your suppliers can work with you.
3) Carefully control receivables and speed up the collection process.
4) Require credit applications from new and existing customers and run credit check before you ship orders.
5) Require partial payment in advance from slow-paying customers.
6) Offer discount for prompt payment of your invoices
7) Ensure that your invoices are prepared correctly and mailed on time so the customer does not delay payments!
8) Deposit checks daily as you get them.
9) Have payments mailed or wired to your bank to speed deposits.

B) Control payables to generate cash
1) Wait until the due date to pay bills.
2) Some vendors will allow you to stretch another 15-20 days. Make use of that.
3) Ask for terms on everything you buy.
4) Some sellers offer free financing. Jump on it!

C) Other ways to reduce outflow of cash:
1) Consider leasing or renting equipment instead of buying them.
2) Use commission-based sales reps instead of salaried salespeople.
3) Use temps to meet seasonal needs instead of hiring permanent employees.
4) Subcontract some of your work rather doing it in house.
5) Delay some purchases of equipment, investment in capital, etc.

D) Find new sources of cash:
1) Get a bank line of credit for working capital.
2) Factor or sell your receivables at a discount, usually from 4-7%, if you need to.
3) Bring in new shareholders by selling stock.
4) Bring in a silent partner if you can.
5) Borrow against your home, or take a personal loan.

E) In general, there are three main sources of cash available to any business. If you know how to handle them well,
and your cash flow will increase. Mismanage them, and you are going to be in trouble!

1) From Operations: meaning from sale of goods and services. These include customer payments, buying inventory,
paying for insurance, advertising, payroll, taxes, etc.

2) From Investing: ex. buying or selling building, land, equipment, etc.

3) From Financing: these include borrowing under line of credit, issuing of stock, money by owners, repayment of
loans, lease payments, etc.

You need to look at each of the above very carefully and decide how to increase cash flow from liquidation of inventory, etc. and how to decrease cash going out for expenses, etc. It is a continuous juggling act. You need to make constant adjustments to numbers on your financial statements and keep a sharp eye on expenses and know exactly how each dollar is spent. Lastly, have only one person issue checks, and reduce the number of people ordering stock to one person so he or she can be held accountable to you!