You know how much cash you have on hand right now, but what about next week or next quarter? Having insight into your cash flow is critical to making better decisions and heading off potential problems before they happen; but answering those questions is not easy to do. For most companies, forecasting accounts receivable is their most difficult forecasting task because it’s very difficult to predict when your customers will pay you. You may know when payment is due, but not all customers pay on time, right? Consider the strategies below to help you increase the accuracy of forecasting accounts receivable to gain better insight into cash flow. Continue reading
Over and over again you are told that cash flow is one of the greatest assets to your company. Without it, your company will crash and burn. However, no one explains why this is true and how you can be tracking your cash flow to ensure it is where it needs to be. What good is hearing this phrase over and over without any meaning behind it. So, what is cash flow projection and how do you calculate it?
One of the best times of the year is when the whole family gets to gather around the table and feast on some traditional fall treats and a big bird. What is not so great about Thanksgiving, however, is the market price of turkey this year has actually increased by 20 percent, according to the USDA. Last year, the price per pound of turkey was around $1.36. This year, expect to see the price per pound around $1.60. On top of all the other ingredients you need to buy, this percent increase can truly add up.
Business loans may not always be the best route. Either you simply can’t get a business loan because you haven’t been established long enough or the bank won’t give you one. Or maybe you simply would prefer not to take out a business loan and have those payments hanging over your head. No matter what the reason is, there are usually other options than simply taking out a loan. One of those options is tapping into your accounts receivable. Often, there are thousands of dollars waiting to be collected on that simply, haven’t. Here’s how to tap into that cash flow.
You can find tons of help books and online articles that tell you all the ways that you can improve cash flow, from improving your sales and closing more deals to improving your accounting process. However, not many articles will tell you what NOT to do. You can add on all the new, trending processes and research to your business, but if you continue to make the same mistakes over and over those processes won’t make a difference. Here are the 4 cash flow sins you need to avoid.
- Being a Bank
There is a method and formula for extending credit to the right customers, and deciding how much credit you can extend. Your business is not a bank, so you can’t go out and extend credit to any customer that asks. Investigate and ask for references. If you continue to make this mistake, you will find yourself with a lot of product sold but no cash to prove it.
- Not Projecting
Obviously, the cash that you have right now is extremely important. However, you should be focusing on how much cash you’re going to have in the future, as well. If you’re not projecting your future cash flow, you may make some bad spending choices that you won’t be able to support next month. It can also tell you how much you need to push collections to open up a larger cash flow.
- No Rainy Day Fund
You never know what could be around the corner. Not saving for a potential crisis in the future is asking for cash flow problems. Plan for a potential disaster and save up about 10 percent of your operating cash to only be touched when an unexpected issue arises.
- Not Sending Timely Invoices
The number one way to ensure that you’re collecting from your customers (one of your largest areas of cash flow), is sending out invoices on time. The longer it takes you to get an invoice to a customer, the longer it will take the customer to pay you. As soon as the service or product has been delivered, make sure the invoice has been sent. This gives customers more time to plan and get the money delivered on time.
- Not Embracing Technology
The technology has arrived to make the sales, collections, and accounts receivable process easier. You can automate almost half of your daily tasks so you can focus on actually talking to customers and getting to the bottom of late payments. Not embracing technology and doing everything by hand is a waste of time and putting you behind your competition.
Go back through your accounts receivable and collections processes and see if you’re committing any of these cash flow sins. If you are, eliminate them. They are most likely holding you back from collecting and reaching your businesses fullest potential.
Being able to plan well for cash flow in aquaculture may be something that most in the industry scoff at. There is little that is truly under your control, and the rest is up to Mother Nature. For example, you may not catch enough pounds depending on the area you set traps, you not have enough man power to set the traps based on the number of hours you’re working in the day, the weather may affect your catch, or simply the catch you’re hoping for just isn’t in season. There are so many outside factors in aquaculture cash flow that your best bet is sometimes using what you can truly rely on to your advantage. This reliable source is simply those who have purchased but haven’t paid their invoice.
Starting a small business can be an extremely scary time. The statistics of staying afloat aren’t exactly encouraging. In fact, the statistics can be quite grim. Studies show that 80 percent of businesses fail due to cash flow management issues. A majority of those businesses who fail even prove to be profitable, but they simply can’t seem to get the cash flow right. These cash flow management issues usually arise because of failed attempts to collect on invoices. The cash is there, it just isn’t in your pocket.
Maintaining cash flow can be one of the most difficult areas of running a business. Especially in construction, where long wait time to get paid seem to be the norm. Collecting on invoices in the heart of maintaining cash flow in construction, so how can you get people to pay you on time? We’ll start by busting the 5 most common construction payment myths, so you don’t make any of these mistakes while trying to increase your cash flow in construction.
Small businesses are the heart of the United States. Movements to “shop local” and participate in Small Business Saturday prove that a lot of people care about small businesses. Unfortunately, sometimes the support from our community just isn’t enough to keep small businesses rolling.
According to a survey from Credit Today, bad checks are on the decline for many businesses, but there are still plenty of industries who continually to struggle with them. You’d think the biggest concern of a bad check is that you won’t ever get paid, but the survey showed that’s not the real trouble with bad checks. In fact, the survey found that only 8% of bad checks go unpaid. The real cost of a bad check and its impact on cash flow is hidden elsewhere.
Unfortunately being profitable on paper does not mean a company has healthy cash flow. In fact, most companies are profitable on paper; they are making more money than they are spending, but are they collecting invoices fast enough for healthy cash flow? That’s the real question and the downfall of many businesses.
As a business professional, you know that paper invoices can’t pay the bills, which is why paying close attention to the status of your accounts receivable department is crucial. But when things seem to be chugging along in the sales department, the data in your accounting system looks good, and the business seems healthy, it can be easy to ignore some of the early signs of a cash flow crisis.
Business growth doesn’t just happen and it doesn’t just happen for free. Company growth requires a significant investment of time, effort, and money when you consider all the things that factor into next-level business. For example, hiring new employees, expanding operations, buying more equipment, etc. Growth is also risky, You don’t want to grow your business straight into the ground by growing too quickly without a plan to access the cash you need to support it.
How are businesses defining growth? How are they attaining it? And what can you do to support growth with positive cash flow? A recent study be E-media found that businesses define growth in a variety of ways:
The MAPI foundation report U.S. manufacturing will grow slightly faster than the general economy in 2015 and 2016. While industry growth forecasts are always good news for manufacturers, it does not always translate to success for individual businesses. To take advantage of the growth in your industry, you need to have a growth strategy and all growth strategies need one thing, cash flow.
As a manufacturer your focus is not on accounting, it’s on producing product, managing inventories, bringing in new business, and on the other important activities that drive revenue. While accounting may not be your greatest focus, it’s extremely important to pay close attention to effectively managing accounts receivable. Why? Because companies who focus on collecting what they are owed as quickly as possible are able to increase manufacturing cash flow, which then allows them to invest in R&D, buy capital equipment, offer competitive prices, and take other important steps toward growth.
Late payment is common in the manufacturing industry, but there are ways to change that in your business. First you need to know why customers are paying you late to begin with.