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21 Ways to Turn Your Cash-Starved Company into a Cash Cow

May 25, 2008
Heed these tips and watch your company's cash flow grow

When Cash is King, it really is King! What do you do when a bluebird opportunity can be pursued only if you have, say, $50,000 to $500,000 (fill in the number and the zeros). Or, a crisis occurs that can be minimized or even solved for $50,000 to $500,000 (again you fill in the zeros).

Regardless of your industry or the size of your company, these 21 points can help you generate cash within six months, which when adopted can either increase your ability to obtain short-term funding to take advantage of unexpected opportunities or buy time to solve operational or financial problems. Better yet, why not think strategically about your company's cash flow before a cash crunch becomes a critical problem that could endanger the growth and survival of your business.

1. Send out regular monthly accounts receivable statements. After all, the squeaky wheel gets attention.
2. Speed up customer invoicing. Customers often define 30 days, or whatever the agreed-upon payment term from when they have the invoice in their possession.
3. Call customers with outstanding invoices and ask for payment. You will find out if there are valid reasons for holding up payment. Again, the squeaky wheel principle applies here.
4. Postpone purchases. It is amazing how much money can be saved by asking the #1 Question: "Do we really need this?"
5. Ask employees for suggestions. An adage comes to mind: "Ain't none of as smart as all of us."
6. Do more with less. Consider asking, "Before we spend this money, what other options do we have?"
7. Review expenses on a line-by-line basis. There is a reason why owners want to sign all the checks and see what kind of things employees buy. It is easy to spend money when it's not your own.
8. Sell slow-moving inventory at a discount. Have your accountant estimate your real cost to carry inventory, including soft costs like warehousing, insurance and security.
9. Temporarily slow down vendor payments. But watch for signs that you may be on a slippery slope.
10. Review inventory levels by day's sales and adjust outstanding and future orders. Remember those horror stories of ordering more of a product when you already have a one- or even two-year supply.
11. Sell and/or lease back assets. A number of sophisticated sources exist to fairly and quickly obtain meaningful levels of cash this way.
12. Increase your company's line of credit while times are good. Banks are always more willing to lend money when you are not in urgent need.
13. Identify products that are loss leaders. Stories abound where the CFO asks why we don't just tape a hundred-dollar-bill to every unit we ship to admit to the money we are losing.
14. Raise prices where appropriate. After all, you are running a business. And businesses need to adjust to factors like rising product costs.
15. Find ways to reduce scrap. Be a detective and search for what caused that scrap. Could it be a symptom of a problem with the raw material purchased, equipment used, employee training, or changes needed in product design and engineering to meet current customer needs?
16. Review intellectual property for royalty opportunities. Some of these underutilized assets are quite valuable to someone else.
17. Assign customer write-offs to a collection agency. There is a time to cut your losses and realize your people will not be able to collect accounts, whereas a professional might.
18. Review services you provide free of charge and consider charging for them. How many of your clients really buy on the basis of free next day delivery to consider options like a premium for next day delivery and free for slower delivery?
19. Review why legal and professional bills are so high. Are too many of your people calling and even confusing your CPA, attorney, or advertising professionals?
20. Review staffing levels and staff on a green-field basis. Stay a little "lean and mean" on staffing and consider cutting your losses on people when things are not working.
21. Obtain external help for an assessment. For political or resource reasons, would you benefit from an impartial outsider who can shed a spotlight on some fairly dusty or bloated issues?

Bonus Tip: Pull this list out every six months to see how you can better manage your company's cash flow. Feel free to add notes or comments and change any words to make it your own. After all, you gain when you internalize information. And in this case, you stand to reap some tangible benefits. Cash!
About the Author
Gary W. Patterson has advised over 200 companies helping improve their profitability and reengineer their business models. You can reach Gary at his website, www.FiscalDoctor.com or his blog, www.FiscalClinic.com , or take the free Fiscal Test at http://fiscaldoctor.com/fiscaltest.html
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