Donna Reade

Specializing in Consulting, Training, E-Commerce Solutions & Bookkeeping for QuickBooks Online

Three Cash Flow Hacks to Improve Your Business

cash flowFinding, getting, and then keeping clients may be the three hardest jobs for any small, medium or large business.

If everyone agrees, I bet we can then say number four is managing cash. “What cash?” is not an appropriate come back. At least I hope it’s not.

Since managing cash is high on the list, I have worked many years on making this daunting task be as simple as possible through just a few simple hacks. These hacks are from real life examples with my own client base. And yes, they work for businesses like yours as well.

Stop Avoiding Bookkeeping, Instead Embrace It

Reconcile cash daily or weekly at a minimum. A few years ago I was asked to review IT Company’s processes. The bookkeeper was the owner’s wife. She believed reconciling cash was like undergoing a root canal without a local anesthetic.

I was tempted to tell her that psychology majors don’t make great bookkeepers, but since she was the wife of the owner, we developed a game plan instead.

She was researching errors occurring as many as three to four weeks after the statement date, this slowed her down. I suggested that she follow-up on errors as close to the date they occurred. And that’s when she agreed that doing daily reconciliations was the way to go.

She loved it. And that’s even coming from a psychology major forced into bookkeeping.

I know you hate doing the monthly reconciliation. But I thought cash was your most valuable asset. If so, true it up daily or weekly. I guarantee you’ll never go back to the old way.

Tighten Up On Unpaid Invoices.

Manage your receivables like a bank does its loan book. I have never taken on a new client that has a strong process for managing their receivables. And I mean never. This means having a follow up schedule for unpaid invoices is the key to keeping your business healthy.

Here is what I would like you or your bookkeeper to do. Pick one day a week to go through your aging report and call those that are past due asking when they will put their check in the mail.

I’m not sure why, but I like Tuesday morning. Just pick a day, and stick to it every week.

While some business owners may disagree, I suggest calling everyone that is even one day past due. Remember, customers that are 30 days past due were once a day in arrears.

Follow this practice and you’ll have trained customers that know you mean business when it comes to paying on time.

Forecast The Future.

Look for seasonal cash flow trends and plan for them. Your accounting system is one big history book. And you loved history as a kid, right?

I like to know what happened. So does the tax person. But what about tomorrow? I like to know what’s going to happen. And that’s where a simplified weekly cash flow forecasting spreadsheet can be a great management tool for any small business in providing insights about your future cash balance.

I have lost count of how many small businesses have thanked me for showing them how to use these tools. They are thanking me because it’s providing them a greater peace of mind.

Intrigued? My suggested next step is to have your bookkeeper tailor a version just for you. I have built these tools spanning a rolling four-week time period. Some are eight weeks. Many are 13 weeks. One of my e-commerce clients maintains a 52-week cash flow forecast. I think he’s nuts (I didn’t tell him that), but he loves it and it probably helps his business.

It’s Your Move!

Stop and think for a second, imagine what the business looks like if you are implementing at least two if not all three of the hacks above. Think you’ll have a more stable business? Probably so, it’s your move and it’s your business.

One Response to Three Cash Flow Hacks to Improve Your Business

  1. Joseph Ezenwa says:

    Donna,
    Managing cashflow is critical for success of any business.A business goes into moribund if it can not generate enough cashlow.Forecasting for future is key because future costs and revenue are relevant for decision making.Past costs are sunk costs and they are not relevant in decision making.