Get That Cash Flow Flowing!

Don't let news of the economy's current state compel you to believe that it's impossible to keep the cash flow flowing. It just means you need to watch your cash flow very closely and be stringent in forecasting your cash flow. Here are tips for exercising your cash flow so it stays in great shape.

Review customer credit: One business runs a credit check on potential customers before taking them on. Another dumps customers with risky credit histories. This isn't the time to be nice and give customers more leeway. Instead, watch for those who struggle with payments and avoid extending credit.

If you can't let a risky or late paying customer go, then call the customer as soon as you see a problem. The customer will appreciate receiving a courtesy call and may be more willing to see you receive your payment ahead of the other companies to which they owe. While you have the company on the phone, agree on a payment date. Once the payment date arrives, be ready to follow up if the cash doesn't come in.

Use bribes... err... motivators to speed payment: Encourage customers to pay faster by offering a one percent (or whatever) discount if they pay by X date. How and when do you send invoices to customers? On the day services are rendered or with the products?

Consider providing invoices earlier in the process (if not already) and provide a due date. You could also indicate that there will be a penalty for late payment. Why not save a tree and send invoices by email? It's an instant way to send them and save on postage, too.

Also, how do you accept payment? Checks? Credit cards? Credit cards and online payments can also speed things along so your cash keeps on flowing.

Get cash: If you're dealing with late paying customers and can't wait for cash much longer -- get some. Sell your invoices (factoring) or obtain a line of credit. Many growing companies do this so they can take advantage of opportunities to take their company to another level whether it is to expand an office, buy equipment, or add a new service/product to the line.

Instead of going to a traditional bank, which may require collateral or take too long with paperwork -- look at alternative financial organizations. Many offer flexibility and work fast to get cash in your pocket.

How do you track collections? Is it included in your accounting application? Don't know? Maybe your application already has it -- you just need to take advantage of it. If the situation grows out of hand, you may need to work with a collection agency.

Pay others: What you owe also has a factor in your cash flow. Maybe you can switch vendors to save money. A vendor might give you a discount for paying faster -- it doesn't hurt to ask! Any step you take to gain the vendor's trust and goodwill helps your cash flow.

Review your leases and contracts. Are prices climbing? Do you need all of it? Can you get a lower interest rate?

The key is to ensure you have the needed cash to meet all your goals and obligations so your company stays in business. For situations that already spiraled out of control, it may be time to seek out a loan or to obtain cash from a financial organization. That could be the difference between a healthy cash flow and bankruptcy.