Tips for Increasing the Cash Flow of Your Business

Need more cash? What business owner doesn’t these days? Even if your revenues have remained stable during this recession, your company may still be short of cash if it’s tied up in accounts receivable, inventory or capital equipment.

Thomas Comollo, a partner with B2B CFO in Ponte Vedra Beach, Fla. says there are several “tricks of the trade” that well-managed companies use to maximize their cash flow. These policies can be used by any sized business. Here are a few that will help maximize the cash in your checking account:

  • Shorten your cash conversion cycle. This is the time that it takes a business to convert a sale to cash. The shorter, the better. Dell keeps its cash conversion cycle one of the best in the business by getting paid up front, ordering parts only after the order has been received and paid for, and not carrying excessive inventory.
  • Reduce accounts receivable. Consider billing by e-mail so customers get invoices more quickly. Tighten your collection policy, and follow up as soon as invoices become overdue.
  • Reduce inventory. Don’t order parts or supplies until you absolutely need them. Limit access to inventory to prevent theft, and get rid of obsolete inventory immediately.
  • Stretch out your payments. Don’t pay vendor bills until they are due, and negotiate longer terms. Don’t be afraid to ask for 60 days to pay. Be careful though, don't create a situation where you start paying late - your good credit is too important!


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