Extraordinary Business: Step 7 of 7 in how to thrive in a down economy - Cash Is King!

The last newsletter was Step 6 - Trim the Fat. We talked about negotiating with your vendors, controlling your overhead expenses and reviewing your employee costs and capacity. The bottom line was even though you may have cut expenses in the past, it pays to review areas that may have appeared as non-negotiable in the past and/or to be more creative with productivity and capacity.

Now it's time to take a closer look at your cash flow, because...Cash is KING!

Look at your credit & collection policies
Unfortunately, in today's economy more people are having a tough time paying their bills. We don't want to upset our customers or be unsympathetic to their financial woes, but in the end, if we don't protect our own financial well being, we may just follow them down the same path.

So, if you haven't reviewed your own credit and collection policies in awhile, it's time to do it now to make sure they are clear and can be followed easily.

If you're uncomfortable handling your own collections, consider hiring a company to do it for you. One company that I recommend to my clients is Greenflag Profit Recovery. For a small fee, they offer an online system that walks you through a "kinder, gentler" way to collect the money.

Recapture cash tied up in inventory
How much inventory do you have tied up on your shelves? Are you tracking the age of your inventory and how many times it's turning over? If you are tracking inventory in a system like Quickbooks, review your inventory reports each month. If not, make your own inventory tracking system with an excel spreadsheet. Determine the number of items you need to have on hand and stop ordering more of it than you need!

Inventory is cash sitting on your shelf and controlling it is a significant key to your financial success.

Develop a weekly cash flow budget
This will be very helpful for those companies that are tight on cash all the time. The object is to estimate what your cash sales and expenses will be for each week over a rolling 6 week timeframe. That will help you know if you are about to run into a tight spot with cash. Most owners I know don't like hearing, "I hate to say it, but we aren't going to have enough cash in the bank to make payroll."

Keep a close eye on it EVERY WEEK and that shouldn't happen to you.

Bottom Line: Without cash your business can't survive. Collect it, control it and watch it like a hawk or risk significant challenges.

So now let me ask. . .

In what ways are you making sure you have good cash flow,  i.e. great inventory systems, collections companies, short term lending options, etc.?