Cash crunch
Cash flow is one of the most important and most ignored economic resources for entrepreneurs and managers. Cash flow management is not included! Many entrepreneurs overlook the fact that accounting rules specify when and how the transactions in its accounts, which is no help if they need to manage their money for next week and next month are recorded.
True cash management must be based on cash flow projections, a tool that makes today's date, the deposit (income), and the future expenses paid projections. How important is cash flow? Remember that companies fail every day because they have money, even if their income statement showed it to be profitable.
What to do if you are in a cash crisis? First understand the factors that cash flow and how to take control. The following factors have the greatest impact on cash flows:
- Accounts receivable (the time between the creation of the account and deposit of the fund)
- Accounts payable (the time between receipt of the invoice for purchases made and your payment on this account, the clearing bank)
- Inventory (the time between payment for materials and disposal of proceeds of the sale of the finished product)
- Investments (cash-out for purchases versus host depreciation over the useful life)
Later in this report, we focus on forecasting and cash flow techniques. Let's start with some quick solutions to get some relief from a cash-flow difficulties could.
1. Get the money!
- Others are waiting to generate fast output calculations - not until the end of the week or a month and e-mail invoicesb. Ask your best customers to accelerate paymentsc. Offering rewards for customers quickly paymentd. Eliminate deliver electronic transfers of payment "is in the record" time. Include flyer with the accounts - offering discounts for prompt payment or to promote the launch of your new product or servicef. On future sales to slow paying customersg requires COD. Aggressively pursue unpaid bills, that is, one day after the due date
- Call the customer a week - to take detailed notes on each call and call
- Involve the owner of the company - do not stop at the AP clerk to call the owner directly
- Create a written collections and follow it, not a "soft" - Set schedules for tough measures. For example, calling a bill is due within 30 days to 31 days, the customer 45 days to provide a payment plan for 75 days to hand over to a collections agency: etc...
- Legal action sooner rather than later - the longer you wait, the further down the list of creditors, you can
- a. prioritize payment of bills - all bills are not the same!
- Pay the most important bills first
- Minimize late fees, interest and penalties - Pay bills with the highest penalty first
- Negotiate interest only payments on the loan for the next 6 months, without penalty
- Not promise something you can not deliver, especially with your bank - if you only pay $ 300 per month pay not agree to $ 500 per month
- Longer payment terms may be much more valuable than a low price
- a. Selling out-of-date inventory, unused equipment, all you need to make money is not
- Pawnshops, Craig's List, eBay and inventory liquidation by businesses are just some of the available options
- Factoring companies will buy your receivables at a discounted price - you get money quickly, assuming that they are responsible for collecting from customers
