PEX Card wants to help small businesses with expense management. Each week we will provide advice, solutions, and answers to your questions.
Q: Can you give me advice or tips on improving my company's cash flow? I own a small landscaping company and struggle with my receivables.
A: Here are some easy ways to improve your company’s cash flow.
1) Make sure your financial information is organized and up-to-date. If you use a software program such as Sage 50 or QuickBooks, take advantage of the alerts when customer invoices are due.
2) If a customer is past due on an invoice, contact them immediately. It could be something as simple as an oversight or it could be something bigger. Start by sending an email and follow up with a phone call if necessary. If they can’t pay over the phone with a credit card, have them commit to a payment date.
3) You need to have a cut off date for providing additional products or services. It could be 60 or 90 days past due. At some point, you need to realize that it may take much longer to get paid. You don’t want to use your finite resources for a client who may or may not pay you.
4) Remember that cash flow is receivables AND payables. In addition to staying on top of outstanding invoices, you need to monitor payables. More specifically, keep an eye on your variable costs such as gas and equipment repairs. If gas prices jump 15-20 cents/gallon, what does that do to your monthly expenses? Do you have a contingency budget in the event one of your machines breaks and either needs to be fixed or replaced.
5) The goal is have a healthy balance between inflow and outflow of money. If you can outsource the job to someone, it will alleviate some of the stress of running your company—maintaining your existing business, finding new clients and balancing the books can be challenging.