jbehar

Posts Tagged ‘cost saving tips’

Cash management for small businesses

In Uncategorized on March 30, 2010 at 11:33 am

Cash is tight today, perhaps more than ever.  While the mainstream media has announced the end of the recession and return of good times, main street businesses are not seeing it.  There a number of reasons for this including, but certainly not limited to:

1.)   Capital markets have improved for public companies/big business but not small businesses.

2.)   According to the NFIB, small business owners have been greatly impacted by the collapse of the real estate market (95% of small business owner’s own at least one property (residential, business, investment, etc.)

3.)   Declining revenues in 2009 have put additional pressure on small business cash flows.

There are certainly a number of other variables impacting small businesses, but I’d like to turn to some practical cash-flow strategies I have recently discussed with a few savvy small business owners.

1.)  Offer your customers an incentive for paying their bills early. Most businesses borrow money for daily operating expenses. When your customers pay their bills early, that is less money you have to borrow to run your business. Encourage your customers to pay their invoices early by passing some of that money you are saving on to them, just like your vendors do for you when you pay early.

2.)  Set cost-saving targets. You have likely already completed one or two rounds of belt-tightening where you cut services you no longer needed, switched to lower cost plan etc.  Now take it to the next level, simply set a target to reduce a particular aspect of your expenditure by, say, 10% over a period of 4 months and then look for ways to achieve that saving. If you break it in to small increments and monitor it carefully it will be easy to make the small changes each month, which will add up to big savings over time.

3.) Personally call people who owe you money to request payment. While it’s never fun to call customers to ask for money they owe you, it makes the matter more urgent when you call then vs. one of your employees.

4.) Invoice immediately. Surprised to still see this happening, but many small businesses generate invoices for each customer every thirty days. Better business cash flow can result from invoicing upon completion or delivery.

5.) Switch credit cards.  Now seems like a good time to switch business credit cards. Move to a business credit card that offers a better deal, whether it’s lower APR, discounts or rewards.  Might want to check out this new business credit card comparison service from Billshrink.

I’ll try to regularly add tips and best practices from my readings and conversations.

Advertisements